Question

Notice that the table is partial and doesn't start at 0, and also that it doesn't go in increments of one at a time (so marginal values are approximations rather than exact).

The firm sells its output for P = $6.50. See below:

Quantity	Total Revenue	Marginal Revenue	Total Cost	Marginal Cost	Profits
200			$1000	--
300	A		$1550
400			$2150	D
500		B	$2800
600			C	$7

What will the firm's profits or losses be at the profit-maximizing (loss-minimizing) quantity? Carefully follow all numeric instructions. Indicate profits with a positive number (no sign) and losses with a negative number (with negative sign).

Answer 1

Quantity	Total	Marginal	Total	Marginal	Profits
	Revenue	Revenue	Cost	Cost
200	1300		$1000		300
300	1950	6.5	$1550	5.5	400
400	2600	6.5	$2150	6	450
500	3250	6.5	$2800	6.5	450
600	3900	6.5	$3500	7	400

MR=P

MC = change in Cost/change in Q

So, profit is maximum where MC=MR at Q = 500, where profit = $450