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.

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

Answer 1

1)

The price is at the minimum ATC = 8.5 and MR=8.5

Output per Day (Q)	Total Cost (TC)	FC	VC	ATC	AVC	MC	MR	TR	Profit =TR-TC
0	10	10	0				8.5	0	-10
1	20.5	10	10.5	20.50	10.50	10.50	8.5	8.5	-12
2	24.5	10	14.5	12.25	7.25	4.00	8.5	17	-7.5
3	28.5	10	18.5	9.50	6.17	4.00	8.5	25.5	-3
4	34	10	24	8.50	6.00	5.50	8.5	34	0
5	43	10	33	8.60	6.60	9.00	8.5	42.5	-0.5
6	55.5	10	45.5	9.25	7.58	12.50	8.5	51	-4.5
7	72	10	62	10.29	8.86	16.50	8.5	59.5	-12.5
8	93	10	83	11.63	10.38	21.00	8.5	68	-25
9	119	10	109	13.22	12.11	26.00	8.5	76.5	-42.51

2.

The profit maximising Q* = 4, P* = 8.5, Profit* = 0