Answer the next question on the basis of the following cost data for a purely co

Question

Answer the next question on the basis of the following cost data for a purely competitive seller:

       TP           TFC     TVC                 
         0           $45         $0
         1             45       170        
         2             45       320        
         3             45       450        
         4             45       620        
         5             45       800        
         6             45       990       
Refer to the above data. If the product price is $185 at its optimal output, exactly how many units should be produced to maximize profits or minimize losses? How much will the profit or loss be? Show all calculations.

Explanation / Answer

In the first scenario, 4 units are produced and sold, because a 5th unit would cost more to make than the price of $75.

In the second scenario, only 3 units are produced and sold because a 4th unit would cost more to make than the price of $60.

From there, I'll bet you can do the math on total cost versus total revenue. And if you assume that the cost figures include opportunity cost, then the answer is your economic profit or loss.

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