Numeric Answer: Suppose that the going price of hats, in a very competitive mark
ID: 1134681 • Letter: N
Question
Numeric Answer:
Suppose that the going price of hats, in a very competitive market, is $34 per hat. Click on the point on the accompanying graph (illustrating the same data in the preceding table) where you find the combination of price and quantity at which George will offer hats.
Assuming again that the competitive market price for hats is $34, at George's profit-maximizing price and quantity of hats, what are his profits?
TFC 0 TVC 25 25 25 25 25 25 25 25 25 25 25 AFC 25 50 25.00 25.00 50.00 66 12.50 20.50 33.00 80 96 TC AVC ATC MC 0 25 41 25 8.33 18.33 26.67 6.25 17.75 24.00 5.00 18.20 23.20 4.17 3.57 21.57 25.14 3.13 24.13 27.25 2.78 27.22 30.00 2.50 30.90 33.40 14 71 116 142 176 218 270 334 91 20 26 34 42 52 64 19.50 23.67 151 193 245 309 10Explanation / Answer
Answer
MC(Q) = TC(Q) - TC(Q-1) i.e. dTC/dQ
Where MC(Q) represents MC at Q unit and TC(Q) and TC(Q-1) represents TC at Q and Q-1 units respectively
Hence MC(2) = TC(2) - TC(1) = 66 - 50 = 16
Also MC(4) = TC(4) - TC(3) = 96 - 80 = 16
Hence Missing Number that belongs in both empty cell of Marginal Cost (MC) coloumn is 16.
Now ,
Market Price = $34. As it is a prefect competitive firm hence profit maximization condition is given by P = MC i.e. firm Produces that anount fo quantity at which p = MC. As Price(P) = 34. Hence Firm will produce that Q at which P = MC = 34 We can see from the Both Table and Graph that, At Q = 7, MC = 34. Hence quantity of Hats George will offer is 7 and Price he will charge = $34. Hence the point on the graph is (7.34) i.e. Quantity = 7 and Price = $34
Price will be same as market Price because it is a perftct competitive market and as showed above that Quantity = 7. At Q = 7, TC = 176.
Now Profit = Total Revenue - Total Cost = P*Q - TC = 34*7 - 176 = 62.
Hence George's Profit = $62
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