Donald is a producer in the perfectly competitive market for cronuts - a pastry
ID: 1135396 • Letter: D
Question
Donald is a producer in the perfectly competitive market for cronuts - a pastry that is half croissant, half donut.
Quantity (cronuts)
Total Fixed Cost TFC ($)
Total Variable Cost TVC ($)
0
125
0
5
125
15
10
125
20
15
125
39
20
125
57
25
125
82
If Donald's profit-maximising quantity is 15 cronuts, what is the marginal revenue per cronut at this profit maximising quantity? Answer to the nearest two decimal places (with no $ sign).
Quantity (cronuts)
Total Fixed Cost TFC ($)
Total Variable Cost TVC ($)
0
125
0
5
125
15
10
125
20
15
125
39
20
125
57
25
125
82
Explanation / Answer
We are given that Donald is operating in a perfectly competitive market for cronuts. Now in such a market, the price and marginal revenue are equal to the marginal cost when profit maximizing quantity is produced.
We are given that profit-maximising quantity is 15 cronuts and at this quantity, marginal cost (addition to total cost divided by change in quantity) is (39 - 20)/(15 - 10) = 3.80. Hence the price or marginal revenue is also $3.8 per cronut
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