Question

Misha makes wooden dolls. The table below shows the daily demand for his dolls and his marginal costs. Misha's total fixed cost is $20 per day. Price 24 22 20 18 16 14 12 10 QD 0 1 2 3 4 5 6 7 MC 0 5 6 7 8 9 10 11. In the scenario above, what is Misha's marginal revenue from the fourth doll? In the scenario above, how many dolls should Misha produce to maximize his profit? In the scenario above, what price should Misha charge for his dolls? $ In the scenario above, when Misha produces his optimal output, his total cost is? In the scenario above, what is the maximum profit that Misha can earn? Suppose now that as new competitors enter the market, the demand for Misha's dolls decreases: at each given price, the quantity demanded decreases by two dolls? How many dolls should Misha produce now to maximize his profit? What price should he charge? What is the highest profit that Misha can earn?

Answer 1

The table below gives the total revneue, marginal revenue, total cost and profit of the firm

Price	QD	MC	TR	MR	TC	Profit	QD'	TR	Profit
24	0		0		20	-20
22	1	5	22	22	25	-3
20	2	6	40	18	31	9	0	0	-31
18	3	7	54	14	38	16	1	18	-20
16	4	8	64	10	46	18	2	32	-14
14	5	9	70	6	55	15	3	42	-13
12	6	10	72	2	65	7	4	48	-17
10	7	11	70	-2	76	-6	5	50	-26

The total revenue and total cost is calcualted as

The table shows that

• Marginal revenue of fourth doll is $10
• The maximum profit ($18) occurs at 4th unit. Then profit maximizing production is 4.
• The price of 4th doll is $16.
• His total cost at optimum is $46
• His total profit is $18
• Suppose demand fall by 2 dolls at each price. the new demand is Qd'. In new scenario Misha earns loss at each level, the qouantity that minimizes loss is 5 dolls
• Price charged is $14
• Profit(loss) is -$13