Question

a) Fill in the table below and answer the following questions. Show your step-by-step calculations either by typing them in the text box below or by submitting a photo of your handwritten calculations to the Drop Box.

(b) How much output will the firm choose to produce? Explain why the firm chooses this level of output.

Quantity	Price	Total Revenue	Total Cost	Profit	Marginal Revenue	Marginal Cost
0	$45		$50
1	$45		$90
2	$45		$120
3	$45		$140
4	$45		$170
5	$45		$210
6	$45		$260
7	$45		$330

Answer 1

1

a.

TR=Price*Quantity

MR=Change in TR/change in output

MC=Change in TC/change in output

Quantity	Price	Total Revenue	Total Cost	Profit	Marginal Revenue	Marginal Cost
0	45		50
1	45	45*1=45	90	45-90=-45	45-0=45	90-50=40
2	45	45*2=90	120	90-120=-30	90-45=45	120-90=30
3	45	45*3=135	140	135-140=-5	135-90=45	140=120=20
4	45	45*4=180	170	180-170=10	180-135=45	170-140=30
5	45	45*5=225	210	225-210=15	225-180=45	210-170=40
6	45	45*6=270	260	270-260=10	270-225=45	260-210=50
7	45	45*7=315	330	315-330=-15	315-370=45	330-260=70

b.

The firm will choose to produce where MR>=MC ie at 5 units.At units beyond this the marginal cost will exceed the marginal revenue.