Refer to the following table Quantity (Bushels) Revenue Total Cost (TC) $1.00 4.

Question

Refer to the following table Quantity (Bushels) Revenue Total Cost (TC) $1.00 4.00 6.00 7.50 9.50 12.00 15.00 19.50 25.50 32.50 40.50 Total Marginal Revenue (MR) Marginal Cost (TR) $0.00 4.00 8.00 12.00 16.00 20.00 24.00 28.00 32.00 36.00 40.00 Profit (TR - TC) $1.00 0.00 2.00 4.50 6.50 8.00 9.00 8.50 6.50 3.50 - 0.50 (MC) $4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 $3.00 2.00 1.50 2.00 2.50 3.00 4.50 6.00 7.00 8.00 4 Suppose the price of wheat rises to $5.00 per bushel. Farmer Parker will maximize profits by producing. bushels of wheat enter a whole number

Explanation / Answer

Profit maximizes where MR = MC

Here MR = 5 and MR when 7 units are produced equals 4.5 (which is less than MR) and when 8 units are produced, MC equals 6 (which is more than MR). Therefore, 7 units will be produced.

Profit amounts to 15.5

Q TR TC TR-TC MR MC 0 0 1 -1 - - 1 5 4 1 5 3 2 10 6 4 5 2 3 15 7.5 7.5 5 1.5 4 20 9.5 11.5 5 2 5 25 12 13 5 2.5 6 30 15 15 5 3 7 35 19.5 15.5 5 4.5 8 40 25.5 14.5 5 6 9 45 32.5 7.5 5 7 10 50 40.5 9.5 5 8

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