Dollars MC per sack (thousands) $380 Densan 304 283 ATC AVC 264 258 225 214 0 2
ID: 1113693 • Letter: D
Question
Dollars MC per sack (thousands) $380 Densan 304 283 ATC AVC 264 258 225 214 0 2 4 6 8 10 12 14 16 18 30 22 24 26 Quantity of coffee sacks of 60 kilos) Figure 84.2 6) Refer to Figure 8.4.2 above. The figure describes the cost and revenue structure of a perfectly competitive coffee farm, on a per-unit basis. What is the profit maximizing number of sacks when the price of coffee in the market is $380 dollars? 6) A) 14 sacks B)22 sacks C6 sacks D) 14 or 22 sacks When the coffee farmer maximizes profit, how much is his profit? 7) 7) Refer to Figure 8.4.2 above. A) $2,134 B) $116 C) $1,624D) $97 8) 8) Refer to Figure 8.4.2 above. If the farm produces 14 sacks of coffee when market price is $380, A) the farmer has maximized his profit. B) the farmer should reduce the number of sacks produced in order to increase his profit. C) the farmer does not earn any profit. D) the farmer has lost an opportunity for additional profit 9) Refer to Figure 8.4.2 above, A) $996 when profit is maximized, the total revenue of the farmer equals: 9) C)$5.320. B) $8.360 D) S2170. ·Explanation / Answer
7.
A perfectly competitive firm profit-maximising condition are ;
Price =MC
It means at profit-maximising price =$380, the quantity will be 22 sacks.
The profit = TR - TC
=P*Q - ATC *Q
= 380* 22 - 283 *22
=8360 -6226
=$2,134
Hence option A is the correct answer.
8.
As it can be seen in the graph, that when price=$280 and firm produces 14 sacks.
The profit= TR - TC
=P*Q - ATC *Q
= 380* 14 - 283 *14
=5320-3962
=$1358
It means at quantity 14 sacks, there will be less profit compare to at profit maximising the level of output.
Therefore it can be said that farmers have lost the opportunity of more profit which he has lost due to not to produce a profit maximising level of output.
Hence option D is the correct answer.
9.
At profit maximising level of output =22 sacks, the perfectly competitive firm Total revenue will be
TR=P*Q
= 380* 22
=$8,360
Hence option B is the correct answer.
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