Question

Output (Cases)	FC	VC	TC	ATC	AVC	MC
0			20
1		12
2		20
3				16
4		37
5			67
6		61
7		81
8		116
9			191

Paul’s Gourmet Chocolate Company: Cost Structure with Revenues

Complete this table. On graph paper, graph Output on the horizontal axis and ATC, AVC, and MC on the vertical axis. Look at the graph to see how the different costs relate.

Output (Cases)	Marginal Cost (MC)	Total Cost (TC)	Marginal Revenue	Total Revenue	Total Profit	Marginal Profit
0
1
2
3
4
5
6
7
8
9

Complete this table. Copy MC and TC from first table. (Assume Price = $20. Where would this Price come from?) On your existing graph, add Marginal Revenue and Marginal Profit.

1. At what Output is Total Profit the highest?   ________
2. What is Marginal Profit at the point of highest Total Profit? _______
3. What are MC and MR at the highest Total Profit? MC _____   MR _____
4. What do you think would happen if Price dropped to $15? Describe.
   
5. What do you think would happen if Price increased to $25? Describe.

Answer 1

Output (Cases)	Fixed Cost	Variable Cost	Total cost	ATC	AVC	MC ()
0	20	-	20
1	20	12	32	32.00	12.00	12
2	20	20	40	20.00	10.00	8
3	20	28	48	16.00	9.33	8
4	20	37	57	14.25	9.25	9
5	20	47	67	13.40	9.40	10
6	20	61	81	13.50	10.17	14
7	20	81	101	14.43	11.57	20
8	20	116	136	17.00	14.50	35
9	20	171	191	21.22	19.00	55
Output(Cases)	MC	TC	MR ()	TR (P = $20)	Total Profit (TR-TC)	Marginal Profit
0		20		0	-20
1	12	32	20	20	-12	8
2	8	40	20	40	0	12
3	8	48	20	60	12	12
4	9	57	20	80	23	11
5	10	67	20	100	33	10
6	14	81	20	120	39	6
7	20	101	20	140	39	0
8	35	136	20	160	24	-15
9	55	191	20	180	-11	-35

a) 7 (because at this point MR=MC)
b) 0
c)  MC = 20, MR= 20