Total Cost 16 31 10 12 61 75 5. If the selling price of the gasoline additive is
ID: 1129986 • Letter: T
Question
Total Cost 16 31 10 12 61 75 5. If the selling price of the gasoline additive is $11 per quart, what level of output should MPG produce to maximize profits? b) 3 e) 6 6. If the selling price of the gasoline additive is $11 per quart, what are the profits of MPG at its profit-maximizing output level? a)-2 b) 2 7. If, when the selling price of the gasoline additive is $11 per quart, MPG produces 2 quarts (though this may not be a smart choice), what would be its level of revenues? b) 5 c) 22 d) 24 e) You can't tell from this information 8. If, when the selling price of the gasoline additive is $11 per quart, MPG produces 2 quarts (though this might not be a smart choice), what would be its level of profits? a) -2 b) 2 e) You can't tell from this informationExplanation / Answer
Ans:
The profit maximizing level of output is where marginal revenue is equal to marginal cost.
5) Option D , 5 units
when the marginal revenue per quart is $11 , MPG should produce 5 units to maximizing profits.
6) Option E , 6
The profits of MPG at its profit maximizing level of output = (5 * $11) - $49
= $55 - $49
= $6
7) Option C , 22
Total revenue when 2 quarts are produced = $11 * 2
= $22
8) Option A , -2
Profits when 2 quarts are produced = ($11 * 2) - $24
= $22 - $24
= -$2