Please explain why the answer is C. attainable point with full employment of all

Question

Please explain why the answer is C.

attainable point with full employment of all resources attainable point without full employment of all resources unattainable point with full employment of all resources unattainable point without full employment of all resources Sue's Sea Shells by the Sea Shore is a perfectly competitive firm selling sea shells at the market price of S3.50/dozen. Sue's Sea Shells by the Sea Shore has fixed costs of 530/day and a daily variable cost schedule in the table above. The profit-maximizing level of output for Sue's Sea Shells by the Sea Shore is 202 dozen sea shells by the sea shore per day. 204 dozen sea shells by the sea shore per day. 206 dozen sea shells by the sea shore per day. 205 dozen sea shells by the sea shore per day.

Explanation / Answer

18)

Marginal Cost = Market Price for Profit Maximization in competetive market

so Marginal Cost must be $ 3.5

Compute Marginal Cost from table given ...you will see that when quantity changes from 205 to 206 ...cost changes from 68.5 to 72.

so marginal cost = 72 - 68.5 = $ 3.5

so 206 is the required quantity.

hence answer is C

19)

dQ = 1300 -1500 = -200

dP = 3.25 - 3 = 0.25

Q = (1500+1300)/2 = 1400

P = (3+3.25)/2 = 3.125

so (dQ/Q)/(dP/P) = -1.786

hence it is elastic.

Now change in revenue = 3.25*1300 - 3*1500 = - $ 275 ......(negative sign indicates decrease in revenue)

thus ans is A

20)

Revenue recieved from sale = 150,000 - 48,000 -42,000 -20,000 = $40,000

Opportunity cost = $40,000

Economic profit = 40,000 - 40,000 = 0

so ans is A

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