Question

Suppose Andy sells basketballs in the perfectly competitive basketball market. His output per day and costs are as follows:

Output per Day (Q) Total Cost (TC)

0 $10.00

1 $20.50

2 $24.50

3 $28.50

4 $34.00

5 $43.00

6 $55.50

7 $72.00

8 $93.00

9 $119.00

1) Make a table with Quantity (Q), Total Cost (TC), Fixed Cost (FC), Variable Cost (VC), Average Total Cost (ATC), Average Variable Cost (AVC), Marginal Cost (MC), and Marginal Revenue (MR) on it (using the Long-Run Equilibrium Price).

2) To maximize profits, how many basketballs will Andy produce? Identity the profit maximizing Quantity (Q*), Price (P*), and Profit (π*).

Answer 1

1) 2)

To maximize profits, Andy will produce 4 or 5 units.

Profit maximizing Quantities are 7 or 8 units where price is 10.28 or 11.62.

Thank you!