Question

2. The following table shows a hospital’s revenue and costs associated with different levels of output...

2. The following table shows a hospital’s revenue and costs associated with different levels of output

OUTPUT

TOTAL REVENUE

TOTAL COST

MARGINAL REVENUE

MARGINAL COST

100

$50,000

$10,000

200

$100,000

$20,000

300

$140,000

$30,000

400

$170,000

$40,000

500

$190,000

$50,000

A. Fill in the marginal revenue and marginal cost columns

B. Should the firm choose one of the output measures in the table? Why or why not?

Homework Answers

Answer #1

A.

OUTPUT TOTAL REVENUE TOTAL COST MARGINAL REVENUE MARGINAL COST
100 50000 10000
200 100000 20000 500 100
300 140000 30000 400 100
400 170000 40000 300 100
500 190000 50000 200 100

B.

Firm should produce more than what is being shown in the table as output measures, because MR is greater than MC at each level of output. For profit maximization, the firm should chose output level where MR = MC. It is the level of output, that is not shown in the above tabular data.

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