Question

Problem 1. Complete the table below. Please use the spreadsheet for your convenience and to submit your responses.
	Given: total Fixed Costs = $60 (i.e., the fixed cost of $60 does not change with output).
	The price of the product is $55
Production Schedule for a widget firm
Output (Q)	Total Fixed Costs (TFC)	Total Variable Cost               (VC)	Total Cost (TC)	Average Fixed Cost (AFC)	Average Variable Cost (AVC)	Average Total Costs (ATC)	Total Revenue (TR)	Profit
0		0
1		45
2		85
3		120
4		150
5		185
6		225
7		270
8		325
9		390
10		465
Question: What is the profit-maximizing output for the firm? Explain.

Answer 1

Complete the table below.

Q	TFC	VC	TC	AFC	AVC	ATC	TR	Profit
0	60	0	60				0	-60
1	60	45	105	60	45	105	55	-50
2	60	85	145	30	42.5	72.5	110	-35
3	60	120	180	20	40	60	165	-15
4	60	150	210	15	37.5	52.5	220	10
5	60	185	245	12	37	49	275	30
6	60	225	285	10	37.5	47.5	330	45
7	60	270	330	8.57	38.57	47.14	385	55
8	60	325	385	7.50	40.63	48.13	440	55
9	60	390	450	6.67	43.33	50.00	495	45
10	60	465	525	6	46.5	52.5	550	25

AFC=FC/QTC=TFC+TVC

AVC=VC/Q

ATC=TC/Q

TR=price*Q

Profit=TR-TC

What is the profit-maximizing output for the firm? Explain.

profit Maximising quantity: 8 unit

Explanation:

Q	TFC	VC	TC	AFC	AVC	ATC	TR	Profit	MC
0	60	0	60				0	-60
1	60	45	105	60	45	105	55	-50	45
2	60	85	145	30	42.5	72.5	110	-35	40
3	60	120	180	20	40	60	165	-15	35
4	60	150	210	15	37.5	52.5	220	10	30
5	60	185	245	12	37	49	275	30	35
6	60	225	285	10	37.5	47.5	330	45	40
7	60	270	330	8.57	38.57	47.14	385	55	45
8	60	325	385	7.50	40.63	48.13	440	55	55
9	60	390	450	6.67	43.33	50.00	495	45	65
10	60	465	525	6	46.5	52.5	550	25	75

MC=change in TC/change in Q

MR=change in TR/change in Q

firm maximizes its profit where MR equals MC. in perfect competition Price=MR.so here at quantity 8, Price=MC. so that will be profit maximising quantity.