The following table presents cost and revenue information for Bob’s bakery produ
ID: 1220161 • Letter: T
Question
The following table presents cost and revenue information for Bob’s bakery production and sales. Bob’s bakery operates in a perfectly competitive market.. A. Complete the table Quantity Total Cost Marginal Cost Price Total Revenue Marginal Revenue 0 $5.00 --- $3.25 --- 1 $5.50 $3.25 2 $6.50 $3.25 3 $8.00 $3.25 4 $10.00 $3.25 5 $12.50 $3.25 6 $15.50 $3.25 7 $19.00 $3.25 8 $23.00 $3.25 B. What level of output would this firm choose to produce in order to maximize profits? C. What would be this firm’s profit? D. Is this profit sustainable in the long run? Why or why not?
Explanation / Answer
A.
B
Profit maximizing output is 6
C.
At the profit maximizing level the prfit is 4
D.
No,because in long run more firms will enter the market.
Quantity TC MC P TR MR Profit 0 5 -- 3.25 0 -- -5 1 5.5 0.5 3.25 3.25 3.25 -2.25 2 6.5 1 3.25 6.5 3.25 0 3 8 1.5 3.25 9.75 3.25 1.75 4 10 2 3.25 13 3.25 3 5 12.5 2.5 3.25 16.25 3.25 3.75 6 15.5 3 3.25 19.5 3.25 4 7 19 3.5 3.25 22.75 3.25 3.75 8 23 4 3.25 26 3.25 3