Question

Quantity	Total Cost
0	$62
10	$90
20	$110
30	$126
40	$144
50	$166
60	$192
70	$224
80	$264
90	$324
100	$404

The table above shows a strawberry farm's short-run production and cost schedule. Suppose that the prevailing market price is $6 per pack of strawberries.

(a) How much is the fixed cost?

(b) Find the profit-maximizing quantity and obtain the resulting maximum profit.

Answer 1

(a) How much is the fixed cost?

$62

Explanation:

Fixed cost does not changes with output. at every level of output fixed cost remains same. so at 0 quantity total cost equals to fixed cost.

(b) Find the profit-maximizing quantity and obtain the resulting maximum profit.

profit maximizing quantity: 90

profit: 216.

explanation:

Q	TC	MC
0	62
10	90	2.8
20	110	2
30	126	1.6
40	144	1.8
50	166	2.2
60	192	2.6
70	224	3.2
80	264	4
90	324	6
100	404	8

firm maximizes its profit where MR=MC. in perfect competition price=MR. so here at quantity 90, MR=MC. so that will be profit maximizing quantity.

profit=TR-TC

=540-324

=216

TR=Price*Q

=6*90

=540