Q1. The following table gives the information regarding the units produced by on

Question

Q1. The following table gives the information regarding the units produced by one factory located in qatar. Complete the table and answer the questions below.Marginal Cost,Marginal Profit,Marginal Revenue,Total Profit for each



Unit of output Total Revenue Total Cost
250 1000 752 251 1004 753
252 1008 755
253 1012 758
254 1016 762
255 1020 767
256 1024 773
257 1028 780


a. Determine the profit-maximizing output level

b. Is the profit-maximizing activity level where marginal profit equals zero?

c. Is the profit-maximizing activity level the same as that at which minimum average costs are experienced? Why or why not?

Explanation / Answer

output TR TC TProfit MC MP MR  AC
250 1000 752 248 - - -  3.008
251         1004 753 251 1 3 4 3
252 1008 755 253 2 2 4  2.996 (Min A .C)
253 1012 758 254 3 1 4      2.996
254 1016 762 254 4 0 4 3     (Profit maximisation point MC=MR)
255 1020 767 253 5 -1 4      3.007
256 1024 773 251 6 -2 4 3.019
257         1028  780 248 7 -3 4 3.035

A.254 UNIT of output
B.YES
C.NO.
Because profit maximisation occurs at that quantity of output where marginal revenue equals marginal cost.

Formula used:  (for ex: At 251 level of output)

Total profit=TR-TC    1004-753=251

MC=TCn-TCn-1           753-752=1

MR=TRn-TRn-1 1004-1000=4

MP=TPn-TPn-1 251-248=3

AC= TC/OUTPUT       753/251=3

 

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