1.)Consider the above table related to Bert\'s Hat Shop. Bert\'s is a profit-max
ID: 1226461 • Letter: 1
Question
1.)Consider the above table related to Bert's Hat Shop. Bert's is a profit-maximizing firm in a perfectly competitive market. It charges $80 per hat to customers.
A. What is the marginal cost of the fourth hat produced?
B.What is the marginal revenue when the 7th unit is produced and sold?
C.What quantity will the firm produce? Enter only a whole, positive number, or 0.
D.Assuming the firm has no implicit costs, the firm's economic profits will equal:
Enter a positive number (no sign) for positive profits and a negative number (with negative sign) for losses.
Quanity TC MC TR MR 0 $0 1 $50 2 $102 3 $157 4 $217 5 $285 6 $365 7 $462 8 $582Explanation / Answer
Working notes:
(1) MC = Change in TC / Change in Q
(2) TR = P x Q = 80 x Q
(3) MR = Change in TR / Change in Q
Therefore:
(A) MC of 4th hat = $60
(B) MR of 7th unit (Q = 7) = $80
(C) Firm will produce that quantity for which MR = MC = $80. This is satisfied at Q = 6
(D) Economic profit = TR - TC
When Q = 6, Profit = $(480 - 365) = $115
Q TC MC TR MR 0 0 0 1 50 50 80 80 2 102 52 160 80 3 157 55 240 80 4 217 60 320 80 5 285 68 400 80 6 365 80 480 80 7 462 97 560 80 8 582 120 640 80Related Questions
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