Answer the next question on the basis of the following cost data for a purely co
ID: 1181324 • Letter: A
Question
Answer the next question on the basis of the following cost data for a purely competitive seller:
Total Product TFC TVC
0 $150 $0
1 150 70
2 150 120
3 150 150
4 150 220
5 150 300
6 150 390
Refer to the above data. If the product price is $55 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
Total Product TFC TVC MC
0 $150 $0
1 150 70 70
2 150 120 50
3 150 150 30
4 150 220 70
5 150 300 80
6 150 390 90
When P = $55, then MR = $55
and we want to produce as long as the rising MC is less than $55.
So we would produce 6 units
Total Revenue would be 6 x $55
= $330.
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