Rewrite these or use the attached Excel file and compute the missing cells. Gather graph paper and plot these coordinates for 3 curves: Qty v. ATC, Qty v. MC, Qty v. Price. Qty will be on the horizontal axis. All questions will refer to this graph. FC, VC, Price are given. The last row Qty 10 is calculated for you.
Qty | FC | VC | AVC | TC | ATC | MC | Price | TR | MR | Profit |
0 | $10 | $6 | ||||||||
1 | 10 | 7 | 6 | |||||||
2 | 10 | 12 | 6 | |||||||
3 | 10 | 16 | 6 | |||||||
4 | 10 | 20 | 6 | |||||||
5 | 10 | 23 | 6 | |||||||
6 | 10 | 27 | 6 | |||||||
7 | 10 | 32 | 6 | |||||||
8 | 10 | 39 | 6 | |||||||
9 | 10 | 49 | 6 | |||||||
10 | 10 | 63 | 6.3 | 73 | 7.3 | 14 | 6 | 60 | 6 | -13 |
Question 5 (1 point)
What is the Marginal Revenue (MR) for the 5th unit?
a |
-$3 |
b |
$30 |
c |
$33 |
d |
$6 |
Question 6 (1 point)
What is the optimal quantity to produce?
a |
10 |
b |
7 |
c |
8 |
d |
0 |
e |
5 |
f |
6 |
Question 7 (1 point)
How much Economic Profit would be made at the optimal production quantiity?
a |
$0 |
b |
-$10 |
c |
$42 |
d |
6 |
e |
-$13 |
Q5) Marginal revenue of 5th unit = total revenue of 5th unit - total revenue of 4th unit
= 5*6 - 4*6 = 30-24 = 6 (d)
Q6) Optimal quantity to produce is a point beyond which the marginal cost of production exceeds the marginal revenue of production. This happens when q = 7 as t 8 units, MC = 39-32 = 7 > 6 = MR. Thus, the answer is (b) 7
Q7) Economic profit at 7 units = total revenue - tptals costs
= pq - fixed cost - variable cost
= 6*7 - 10 - 32
= 42-42 = 0
Thus, the answer is (a)
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