Question

Suppose you are given the following table:

Output	Price	Total Cost	Total Revenue	Marginal Revenue	Marginal Cost	Average Total Cost	Profit/ Loss	(P-ATC)
0	150	100
1	138	150
2	125	184
3	113	208
4	100	227
5	88	250
6	75	280
7	63	318
8	50	366
9	38	425
10	25	500

a. Determine the optimum /profit maximizing point using the MR-MC Principle

b. At this point, what are the total profits?

c. Calculate (Price - A.T.C.) at each unit level of output. At what point is this difference at a maximum?

d. Trace the demand and M.R. curves. How would you describe this relationship?

Answer 1

Output	Price	Total Cost	Total Revenue	Marginal Revenue	Marginal Cost	Average Total Cost	Profit/	(P-ATC)
							Loss
0	150	100	0	0			-100
1	138	150	138	138	50	150	-12	-12
2	125	184	250	112	34	92	66	33
3	113	208	339	89	24	69.333	131	43.66667
4	100	227	400	61	19	56.75	173	43.25
5	88	250	440	40	23	50	190	38
6	75	280	450	10	30	46.667	170	28.33333
7	63	318	441	-9	38	45.429	123	17.57143
8	50	366	400	-41	48	45.75	34	4.25
9	38	425	342	-58	59	47.222	-83	-9.222222
10	25	500	250	-92	75	50	-250	-25

a) the point where MR-MC is minimum gives the maximum profit. that is at an output level of 5.

b) At this point, total profit is 190

C) At 3 units of output.

D)