Question

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. ( My First name letters are 6 and the last name letters are 8 )

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).

Answer 1

Answer;

The table:

Price	Quantity	TR	MR	TC	MC	Profit
14	1	14	0	6	0	8
13	2	26	12	14	8	12
12	3	36	10	20	6	16
11	4	44	8	25	5	19
10	5	50	6	29	4	21
9	6	54	4	32	3	22
8	7	56	2	34	2	22
7	8	56	0	37	3	19
6	9	54	-2	41	4	13
5	10	50	-4	46	5	4
4	11	44	-6	53	7	-9
3	12	36	-8	62	9	-26
2	13	26	-10	73	11	-47
1	14	14	-12	86	13	-72

Profit is maximum at Q = 6 and Q = 7.
At Q = 6, MR($4) is greater than MC ($3). So, firm will produce more till MR = MC, that is at Q = 7.

Graph:

Fom the graph, it is evident that Q = 7, P = 8. Output is where MR=MC.