Question

How much output should a perfectly competitive firm should produce?

1  Profit = Total Revenue – Total Cost

a  Compute total revenue and total cost for each level of output

b   Subtract total cost from total revenue, yielding the profit possible at each level of output

c  Select that level of output for which profit is greatest.

Output Q	TC	TR Price =$60	Profit	TR Price = $40	Profit	TR Price = $20	Profit
0	$120
1	170
2	204
3	228
4	247
5	270
6	300
7	338
8	386
9	445
10	520
11	615
12	732

2. Compute MC at each level of output and compare MC with each MR at each price.

Select that level of output for which MR is greater or equal to MC at each level of output. (MR is equal to price at each price level).

Q	TC	MC	MR Price=$60	MR Price = $40	MR Price=20
0	$120
1	170
2	201
3	228
4	247
5	270
6	300
7	338
8	386
9	445
10	520
11	615
12	732

Answer 1