Question

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

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*).

Homework Answers

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

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