The table given below shows the total revenue and total cost of producing a comm
ID: 1223101 • Letter: T
Question
The table given below shows the total revenue and total cost of producing a commodity.
Table 9.1
Total Output
Total Revenue
Total Cost
0
$0
$1,000
1
$1,700
$2,000
2
$3,300
$2,800
3
$4,800
$3,500
4
$6,200
$4,000
5
$7,500
$4,500
6
$8,700
$5,200
7
$9,800
$6,000
8
$10,800
$7,000
9
$11,700
$9,000
In Table 9.1, in order to maximize profits, the firm should produce ____ units of output.
seven
six
nine
eight
five
The table given below shows the total revenue and total cost of producing a commodity.
Table 9.1
Total Output
Total Revenue
Total Cost
0
$0
$1,000
1
$1,700
$2,000
2
$3,300
$2,800
3
$4,800
$3,500
4
$6,200
$4,000
5
$7,500
$4,500
6
$8,700
$5,200
7
$9,800
$6,000
8
$10,800
$7,000
9
$11,700
$9,000
Explanation / Answer
As you know profit will be maximized there, where the difference between total revenue and total cost maximizes.
The firm will produce 7 units of output to maximize profit. Because the cost of producing an additional unit from 6th unit is $800 which is lower than cost of producing an additional unit from 7th to 8th unit which is $1000.
Total Output Total Revenue($) Total Cost($) Profit($) 0 0 1000 - 1000 1 1700 2000 - 300 2 3300 2800 500 3 4800 3500 1300 4 6200 4000 2200 5 7500 4500 3000 6 8700 5200 3500 7 9800 6000 3800 8 10800 7000 3800 9 11700 9000 2700Related Questions
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