Question

Complete the following cost and revenue schedule.

  

Price	Quantity Demanded	Total Revenue	Marginal Revenue	Total Cost	Marginal Cost	Average Total Cost
200	0			240
180	10			360
160	20			500
140	30			660
120	40			840
100	50			1040
80	60			1260
60	70			1500
40	80			1760
20	90			2040

a. At what rate of output are profits maximized within this range?

b. What are total profits at that output rate?

Answer 1

Answer:

Price	Quantity Demanded	Total Revenue	Marginal Revenue	Total Cost	Marginal Cost	Average Total Cost
200	0	0	---	240	---	---
180	10	1800	1800	360	120	36
160	20	3200	1400	500	140	25
140	30	4200	1000	660	160	22
120	40	4800	600	840	180	21
100	50	5000	200	1040	200	20.8
80	60	4800	-200	1260	220	21
60	70	4200	-600	1500	240	21.43
40	80	3200	-1000	1760	260	22
20	90	1800	-1400	2040	280	22.67

a. Profit maximized when output is 50 units.

Profit maximized when MC = MR.

At 50 units of output, MC = MR = 200

b. Total profit = Total revenue - Total cost

At 50 units of output, TR = 5000 and TC = 1040

Total profit = 5000 - 1040

Total profit = 3960

Calculation:

Price	Quantity Demanded	Total Revenue	Marginal Revenue	Total Cost	Marginal Cost	Average Total Cost
200	0	200*0=0	---	240	---	---
180	10	180*10=1800	1800-0=1800	360	360-240=120	360/10=36
160	20	160*20=3200	3200-1800=1400	500	500-360=140	500/20=25
140	30	140*30=4200	4200-3200=1000	660	660-500=160	660/30=22
120	40	120*40=4800	4800-4200=600	840	840-660=180	840/40=21
100	50	100*50=5000	5000-4800=200	1040	1040-840=200	1040/50=20.8
80	60	80*60=4800	4800-5000=-200	1260	1260-1040=220	1260/60=21
60	70	60*70=4200	4200-4800=-600	1500	1500-1260=240	1500/70=21.43
40	80	40*80=3200	3200-4200=-1000	1760	1760-1500=260	1760/80=22
20	90	20*90=1800	1800-3200=-1400	2040	2040-1760=280	2040/90=22.67

Formulas used in calculation:

1. Total revenue = Price * Quantity

2. Marginal revenue of (n) = Total revenue of (n) – Total revenue of (n-1)

3. Marginal cost of (n) = Total cost of (n) – Total cost of (n-1)

4. Average total cost = Total cost / Quantity