Example of MR=MC --- Question? EXAMPLE of MR=MC How about if we try an EXAMPLE o

Question

Example of MR=MC --- Question?

EXAMPLE of MR=MC

How about if we try an EXAMPLE of MR=MC for a perfectly competitive firm?

(TCO C) Answer the next question on the basis of the following information for a purely competitive firm:

Output------------Price------------Total Cost

----0--------------$100---------------$100

----1--------------$100---------------$260

----2--------------$100---------------$290

----3--------------$100---------------$350

----4--------------$100---------------$480

----5--------------$100---------------$700

How many units would the above profit-maximizing firm produce?

Explanation / Answer

as marginal revenue at all output = 100*(1) =100

so MR =100

and we have to see where MC =100 for profit maximising

we see that from output =2 to 3 , cost changes from 290 to 350 so MC =350-290=60

and output =3 to 4 , cost changes from 350 to 480 so MC =480-350=130

so as marginal cost has changed from 60 to 130 between output=3 and output =4

so optimum output lies between 3 and 4. So optimum output =4 as difference between 130 and 100 is less than 100 and 60

so profit max output =4

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