Question

2. Complete a table for Q, Price, TC, MC, MR and profits.

Start the price at the number of letters in your first and last names combined for Q = 1, and then reduce the price as Q increases.

For costs, begin with TC = 6 at Q = 1, then you may use any numbers you like for costs. You may need to play around with the numbers to make this work out.

Show that MR = MC at profit maximization. Graph MR, MC and Price and show the profit maximizing level of output. (You don’t need to graph ATC and show the profit rectangle).

My first and last names combined have 20 letters. Thank you so much!

Answer 1

In the table above, we have shown the values of price , quantity, total cost, total revenue, marginal revenue and marginal cost.

Profit is maximized at the point where MR=MC

Here, MR=MC=4 at the point where quantity is 3 units and price is $12.

In the diagram below, we have plotted the MR,MC and P(demand) curves from the above table :