Next, let\'s practice finding profit-maximization points for several different p

Question

Next, let's practice finding profit-maximization points for several different prices. In all cases, l ask you to do it twice - once by the "aggregate" approach (by calculating profit and choosing the largest number) and then by the "marginal" (MR vs. MC) approach. The algorithms for using each of the two approaches are on slides 205 and 215 in the notes. The templates are provided below. The solved problem 11-3 on pp.375-6 in the chapter will also be helpful. In , the price of each unit of output is $1.80. Fill out the two tables below and state the answers. Optimal number of units to produce = Maximum profit = Last unit worth producing is unit # Therefore, Frances should produce units. Go back to the graph and use the information from the tables on this page to outline the "box" corresponding to Frances' profit, the way it is explained and done on pp.375-377 in the text.

Explanation / Answer

Output per day Total Cost Total Revenue = $1.80 x output Total profit 0 $1 $0 -$1 1 $2.5 $1.8 -$0.7 2 $3.5 $3.6 $0.1 3 $4.2 $5.4 $1.2 4 $4.5 $7.2 $2.7 5 $5.2 $9 $3.8 6 $6.8 $10.8 $4 7 $8.7 $12.6 $3.9 8 $10.7 $14.4 $3.7 9 $13 $16.2 $3.2 Optimum units to be produced = 6 Maximum profit $4 Output per day Total Cost Marginal Cost Marginal Revenue Units produced (y/n) 0 $1 1 $2.5 $1.5 $1.8 yes 2 $3.5 $1 $1.8 yes 3 $4.2 $0.7 $1.8 yes 4 $4.5 $0.3 $1.8 yes 5 $5.2 $0.7 $1.8 yes 6 $6.8 $1.6 $1.8 yes 7 $8.7 $1.9 $1.8 No 8 $10.7 $2 $1.8 No 9 $13 $2.3 $1.8 No When the marginal revenue is greater than the marginal cost, the firm is not producing enough goods and should increase its output until profit is maximized. Last unit worth producing 6 Frances produces 6 units

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