32) Please refer to the figure above depicting a characteristics of a farmer\'s

Question

32) Please refer to the figure above depicting a characteristics of a farmer's s costs and reven $A MC ATC 20 0 100 350 500 700 q Bales of hay a) What is the farmer's profit-maximizing level of output? b) What is the farmer's profit at that level of output? c) If the market price falls to $18 per bale, what should the farmer do maximize profits? d) At $18 per bale, if the farmer produces the profit maximizing amount, what will his total revenues be? e) What is the farmer's best course of action at a price of $15 per bushel? (Ctrl)"

Explanation / Answer

a) prifit is maximized at MR=MC

therefore, profit maximizing output is 500

b) profit = total revenue(TR) - total cost(TC)

TR= price*quantity = 24*500=12000

TC= 20*500 = 10000

profit = 12000-10000 = $2000

c) at price =$18 the firm earns zero economic profit . At this point firm maximizes profit by selling 350 units of output.

d) at$18 firm earns zero economic profit that is total reveneu= total cost so profit is zero.

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