NEED HELP WITH B & C 1. (42 total points) Suppose that a monopolistically compet
ID: 1096171 • Letter: N
Question
NEED HELP WITH B & C
1. (42 total points) Suppose that a monopolistically competitive firm must build a production facility in order to produce a product. The fixed cost of this facility is FC = $24. Also, the firm has constant marginal cost, MC = $3. Demand for the product that the firm produces is given by P = 27-3Q.
a) (27 points) Fill in the table below. If any of your values have decimals, you may round to only one numeral after the decimal (nearest 10th of a dollar).
Quantity of Output
Price
Total Cost
Average Total Cost
Total Revenue
Profits
1
24
27
27
24
-2
2
21
30
15
42
12
3
18
33
11
54
21
4
15
36
9
60
24
5
12
39
7.8
60
21
6
9
42
7
54
12
7
6
45
6.4
42
-3
8
3
48
6
24
-24
9
0
51
5.7
0
-51
b) (10 points) How much output will this firm produce if it maximizes profit?
c) (5 points) What price should this firm charge if it wants to maximize profit?
Thanks
Quantity of Output
Price
Total Cost
Average Total Cost
Total Revenue
Profits
1
24
27
27
24
-2
2
21
30
15
42
12
3
18
33
11
54
21
4
15
36
9
60
24
5
12
39
7.8
60
21
6
9
42
7
54
12
7
6
45
6.4
42
-3
8
3
48
6
24
-24
9
0
51
5.7
0
-51
Explanation / Answer
Quantity of Output
Price
Total Cost
Average Total Cost
Total Revenue
Profits
Marginal revenue
Marginal average cost
1
24
27
27
24
-2
-
-
2
21
30
15
42
12
18
-12
3
18
33
11
54
21
12
-4
4
15
36
9
60
24
6
-2
5
12
39
7.8
60
21
0
-1.2
6
9
42
7
54
12
-6
-.8
7
6
45
6.4
42
-3
-12
-.7
8
3
48
6
24
-24
-18
-.4
9
0
51
5.7
0
-51
-24
-.3
The profit maximization can be identified by a comparison of total revenue and total cost. The quantity of output that achieves the greatest difference of total revenue over total cost is profit maximization.
From the above table, the maximum profit is at output quantity 4 and the price at this level of output is $ 15.
Quantity of Output
Price
Total Cost
Average Total Cost
Total Revenue
Profits
Marginal revenue
Marginal average cost
1
24
27
27
24
-2
-
-
2
21
30
15
42
12
18
-12
3
18
33
11
54
21
12
-4
4
15
36
9
60
24
6
-2
5
12
39
7.8
60
21
0
-1.2
6
9
42
7
54
12
-6
-.8
7
6
45
6.4
42
-3
-12
-.7
8
3
48
6
24
-24
-18
-.4
9
0
51
5.7
0
-51
-24
-.3
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