Jimmy is the owner of the only gelato shop on North Stradbroke Island. He sells
ID: 1135411 • Letter: J
Question
Jimmy is the owner of the only gelato shop on North Stradbroke Island. He sells the gelato in cones, with the marginal cost of each gelato cone being constant at $0.80 per cone. Below is a table of potential prices and corresponding quantities of gelato cones he could sell.
Price ($/cone)
Quantity (cones)
6.80
50
6.20
60
5.60
70
5.00
80
4.40
90
3.80
100
What is Jimmy's revenue at his profit maximising level of production? ___ Answer to the nearest whole number (with no decimal places or $ sign).
Price ($/cone)
Quantity (cones)
6.80
50
6.20
60
5.60
70
5.00
80
4.40
90
3.80
100
Explanation / Answer
Jimmy's revenue at his profit maximising level of production is 400
The profit maximising level of production is the point where the profit is maximum.
Revenue = Price x quantity
Total cost = Marginal cost x quantity
Profit = Revenue - Total cost
Price ($/cone) Quantity (cones) Revenue Total cost Profit 6.8 50 340 40 300 6.2 60 372 48 324 5.6 70 392 56 336 5 80 400 64 336 4.4 90 396 72 324 3.8 100 380 80 300Related Questions
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