Use the following graph to answer Questions 11-15. The graph illustrates the mar

Question

Use the following graph to answer Questions 11-15. The graph illustrates the marginal costs of a thermometer producer facing a constant selling price of $1.00 per thermometer. Marginal Cost 1.00 Price 0 20 40 60 S 100 120 Quantity of Thermometers 11. What level of output should the firm produce, based on marginal analysis? 40 thermometers, because this is where the marginal cost is lowest Somewhere between 40 and 100 thermometers, because in these cases it gets back $1 for selling each thermometer, but produces each one at a marginal cost that is lower than $1 a) b) c) 100 thermometers, because in this case the last unit can be sold for exactly as much as d) More than 100 thermometers-price-taking firms can sellall they want at the going e) You can't tell from this graph. it cost to produce it price! 12. If the thermometer producer sells 40 thermometers (though this may not be a smart choice), what will be its total revenues? a) $ 0.50 b) $1.00 c) $ 20.00 d) $40.00 e) $100.00

Explanation / Answer

11) THe answer is C-) 100 thermometres because in this case the last unit can be sold for exactly at the cost to produce it.

because, we know for a comeptitive firm, the profit maxmization output is where its MC equal to price.

12) The answer is C-) $20.00

becasue TR = P*Q = 40*0.50 = 20

13) The answer is E -) $100

14) The answer is C-) $ 8

profit = TR -TC

profit = 100 - 92 = 8

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