The following schedule shows demand and total cost for a firm with market power:
ID: 1109201 • Letter: T
Question
The following schedule shows demand and total cost for a firm with market power:
Price
Quantity
Total Cost
$30
10
$200
29
11
208
28
12
217
27
13
227
26
14
238
25
15
250
24
16
263
To maximize profit firm should produce ______ units of output and charge a price of $_______.
At this level of output the firm earns a profit of $________.
The last unit of output produced and sold adds $________ to revenue and $________ to cost.
One more unit of output beyond the profit-maximizing level of output would add $________ to revenue and $________ to cost, thereby ___________ profit by $________.
Price
Quantity
Total Cost
$30
10
$200
29
11
208
28
12
217
27
13
227
26
14
238
25
15
250
24
16
263
Explanation / Answer
To maximize profit , firm shoud produce 14 units of output and charge a price of $26 . at this level of oiutput the firms earns a profit of $126.
The last unit of output produced and sold adds $13 to revenue and $11 to cost. one more unit of output beyond the profit-maximizing level of output would add $11 to reveneu and $12 to cost, thereby reduced profit by $1.
Price Quantity Total Cost Marginal cost Total revenue Marginal revenue $30 10 $200 ----- 300 ------ 29 11 208 8 319 19 28 12 217 9 336 17 27 13 227 10 351 15 26 14 238 11 364 13 25 15 250 12 375 11 24 16 263 13 384 9