SHORT ANSWER 1. Fill in the table below. (4 points) Output Price TR MR TC MC 0 1
ID: 2443599 • Letter: S
Question
SHORT ANSWER
1. Fill in the table below. (4 points)
Output
Price
TR
MR
TC
MC
0
1500
0
------------
300
---------
1
1500
500
2
3000
1000
3
4500
2000
4
6000
3500
5
7500
5500
6
9000
8000
a. What is the profit maximizing output level? (2 points)
b. What is the profit per unit? (Price-ATC) Show all necessary work. (3 points)
c. What is the economic profit? Show all necessary work. (3 points)
Output
Price
TR
MR
TC
MC
0
1500
0
------------
300
---------
1
1500
500
2
3000
1000
3
4500
2000
4
6000
3500
5
7500
5500
6
9000
8000
Explanation / Answer
ANSWER:
mr = change in total revenue / change in quantity
mc = change in total cost / change in quantity
atc = total cost / no of units
A) Profit maximizes when mr = mc and the output at that point is 4.
B) Price = 1,500
atc = tc / q = 3,500 / 4 = 875
profit = price - atc = 1,500 - 875 = 625
C) Economic profit (4 units) = tr - tc = 6000 - 3500 = 2,500
OUTPUT PRICE TR MR TC MC 0 1500 0 - 300 - 1 1500 1500 1500 500 200 2 1500 3000 750 1000 500 3 1500 4500 500 2000 333.33 4 1500 6000 375 3500 375 5 1500 7500 300 5500 400 6 1500 9000 250 8000 416.67Related Questions
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