2. The table below shows the total cost and total revenue figures for Pizzaiolo,

Question

2. The table below shows the total cost and total revenue figures for Pizzaiolo, a perfectly- e tirm producing pizza. Use this information to answer the following questions Assume that the market price is S9 per pizza. QuantityTotal TotaTotal Total Marginal Marginal Average Average Variable Cost (TC) Reveue Revenue Cost (TR) Cost (MR) (MC) Cost Cost (ATC)AVO 0 $8 2 10 18 27 36 45 54 63 5 3.67 5 13 19 27 37 3.8 4.5 5.29 1.25 2.2 3.17 4.14 19 10 29 a. (I point) What must total fixed cost (TFC) be equal to?TFC-8 b. (3 points) Fill in the table for total variable cost (TVC), marginal revenue (MR), and marginal cost (MC). Remember to put marginal items in between units c. (I point) Given the market price of $9 per pizza, how much will Pizzaiolo produce to maximize profits? The firm will produce 6 pizzas. d. (2 points) Fill in the remaining columns in the table above, for average total cost (ATC) and average variable cost (A VC). Where needed, round to two decimal places

Explanation / Answer

There is simple reason profits here are maximum

Profits =TR-TC

Now if you subtract TR minus total cost for each level of output we have

1 0-8=-8

2 9-9=0

3 27-11=16

4 36-13=23

5 45-19=26

7 54-27=27

8 63-37=26

So highest profits (27) are achieved when output is 27

There is another reason even though Mc is rising till 6th unit MR >Mc. When output reaches 7 MR<Mc. So firm will not produce 7th unit

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