Answer the next question on the basis of the following cost data for a purely co

Question

Answer the next question on the basis of the following cost data for a purely competitive seller:

       TP          TFC     TVC                 
         0           $45         $0
         1             45       170        
         2             45       320        
         3             45       450        
         4             45       620        
         5             45       800        
         6             45       990       
Refer to the above data. If the product price is $165 at its optimal output, exactly how many units should be produced to maximize profits or minimize losses? How much will the profit or loss be? Show all calculations

Explanation / Answer

WE CAN SEE THAT AT 3 UNITS, REV = TC, HENCE NO PROFIT NO LOSS.
THUS, 3 UNITS SHOULD BE PRODUCED TO MAX PROFIT AND MIN LOSSES.

(PRICE * TP) (REV - TC) TP TFC TVC TC REVENUE PROFIT 0 45 0 45 0 -45 1 45 170 215 165 -50 2 45 320 365 330 -35 3 45 450 495 495 0 4 45 620 665 660 -5 5 45 800 845 825 -20 6 45 990 1035 990 -45

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