2. Price TC 12.00 5.00 11.00 MC MR Profits 2 10.00 9.00 15.00 8.00 12.00 2. Comp

Question

2. Price TC 12.00 5.00 11.00 MC MR Profits 2 10.00 9.00 15.00 8.00 12.00 2. Complete a table for Q, Price, TC, MC, MR and profits. Start the price at $12.00 for Q = 1, and then reduce the price as Q increases. For costs, begin with TC = 5 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 P and show t profit maximizing level of output. (You don't need to graph ATC and show the profit rectangle).

Explanation / Answer

Q Price TC MC TR MR Profits 1 12 6 12 12 6 2 11 10 4 22 10 12 3 10 14 4 30 8 16 4 9 18 4 36 6 18 5 8 22 4 40 4 18 6 7 26 4 42 2 16 Profit is maximum at Q = 5. At this point MR=MC = 4. I have taken TC = 6 and constant MC . You amy choose as you may want. Q Price TC MC TR MR Profits 1 12 6 12 12 6 2 11 10 4 22 10 12 3 10 14 4 30 8 16 4 9 18 4 36 6 18 5 8 22 4 40 4 18 6 7 26 4 42 2 16 Profit is maximum at Q = 5. At this point MR=MC = 4. I have taken TC = 6 and constant MC . You amy choose as you may want.

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