Help 100% -. Week 10 Written Hw.pdf (page 2 of 2)- 3. A company\'s marginal cost
ID: 2886551 • Letter: H
Question
Help 100% -. Week 10 Written Hw.pdf (page 2 of 2)- 3. A company's marginal cost and marginal revenue are glven in the table below q (thousands of items) 4000 5000 6000 7000 8000 9000 10,000 MC (dollars per item) 47 40 38 35 32 36 39 MR (dollars per item) 37 37 37 37 37 37 37 When production is 5000 items, what is marginal profit? Explain what your answer means to the company, be specific. (2 points) a. b. When production is 8000 items, what is marginal profit? Explain what your answer means to the company; be specific. (2 points) When production is 9000 items, what is marginal profit? Explain what your answer means to the company; be specific. (2 points) c. Approximately what production level would lead to a maximum profit? (Your answer can be a range in which the maximum profit occurs: it does not need to be a precise value.) Explain or show your reasoning: (4 points) d.Explanation / Answer
(a)
we know that
marginal profit = marginal revenue - marginal cost
At q=5000:
MR=37
MC=40
so, MP=MR-MC
MP=37-40
MP=-3
so, on selling q=5000 , profit of company will be decreasing $3 per unit
(b)
we know that
marginal profit = marginal revenue - marginal cost
At q=8000:
MR=37
MC=32
so, MP=MR-MC
MP=37-32
MP=5
so, on selling q=8000 , profit of company will be increasing $5 per unit
(c)
we know that
marginal profit = marginal revenue - marginal cost
At q=9000:
MR=37
MC=36
so, MP=MR-MC
MP=37-36
MP=1
so, on selling q=9000 , profit of company will be increasing $1 per unit
(d)
Profit would be maximum when MP=0
since,
MP=MR-MC
0=MR-MC
MR=MC
we can find q where MR = MC
we can see that MR=MC between q=5000 and q=6000
and between q=9000 and q=10000
so, maximum profit will occur between
(i)q=5000 and q=6000
(ii)q=9000 and q=10000
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