1. Fill in the table below (4 points) Output Price TR MR TC MC 0 1000 0 --------
ID: 2443987 • Letter: 1
Question
1. Fill in the table below (4 points)
Output
Price
TR
MR
TC
MC
0
1000
0
---------------
700
------------------
1
1000
800
2
950
1000
3
900
1300
4
850
1800
5
800
2400
6
750
3200
a. What is the profit maximizing output level? ( 2 points)
b. What is the profit per unit? (Price-ATC) Show all necessary work. (3 points
c. What is the economic profit? Show all necessary work. (3 points)
Output
Price
TR
MR
TC
MC
0
1000
0
---------------
700
------------------
1
1000
800
2
950
1000
3
900
1300
4
850
1800
5
800
2400
6
750
3200
Explanation / Answer
ANSWER:
tr = price * output
mr = change in total revenue / change in quantity
mc = change in total cost / change in quantity
atc = total cost / no of units
A) Profit maximizes when mr = mc and the output at that point is 5.
B) Price = 800
atc = tc / q = 2,400 / 5 = 480
profit = price - atc = 800 - 480 = 320
C) Economic profit (5 units) = tr - tc = 4000 - 2400 = 1,600
OUTPUT PRICE TR MR TC MC 0 1000 0 - 700 - 1 1000 1000 1000 800 100 2 950 1900 450 1000 100 3 900 2700 266.67 1300 100 4 850 3400 175 1800 125 5 800 4000 120 2400 120 6 750 4500 83.33 3200 133.33Related Questions
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