Refer to the figure and table below: - = If the price of catfish fell from $13 t
ID: 1228409 • Letter: R
Question
Refer to the figure and table below:
-
=
If the price of catfish fell from $13 to $7 per bushel, determine the:
(a) Profit-maximizing output.
Instructions: Enter your response rounded to the nearest whole number.
bushels
(b) Profit or loss per bushel.
Instructions: Enter your response rounded to the nearest whole number. Indicate a negative response (loss) with a (-) negative sign.
per bushel.
(c) Total profit or loss.
Instructions: Enter your response rounded to the nearest whole number. Indicate a negative response (loss) with a (-) negative sign.
Number of Bushel
(per Day) (2)
Price (3)
Total Revenue
-
(4)Total
Cost
=
(5)Total
Profit (6)
Marginal
Revenue (7)
Marginal
Cost 0 $ 13 $ 0 $ 10 - $10 -- -- 1 13 13 15 - 2 $ 13 $ 5 2 13 26 22 + 4 13 7 3 13 39 31 + 8 13 9 4 13 52 44 + 8 13 13 5 13 65 61 + 4 13 17
Explanation / Answer
The profit maxiising level of output is one where MR=MC. For example in our case above MR=MC=13 at 4 units of bushel.
If the price is reduced to 7 from the given 13 we get the table below
(1)
Number of Bushel
(per Day)
(2)
Price
(3)
Total Revenue
-
(4)
Total
Cost
=
(5)
Total
Profit
(6)
Marginal
Revenue
(7)
Marginal
Cost
0
$ 7
$ 0
$ 10
- $10
--
--
1
7
7
15
- 8
$ 7
$ 5
2
7
14
22
-8
7
7
3
7
21
31
- 10
7
9
4
7
28
44
-16
7
13
5
7
35
61
-26
7
17
So here it is evident that the profit maximising outout at MC=MR=7 which occurs at 2 units of bushels.
Thus
(a) Profit-maximizing output.= 2 bushels
(b) The per bushel Loss per bushel is given in the table above in column (8). It is seen that the TC.TR for all levels of output. Hence there are losses at each level of output. The values can similarly be calculated if the rpice remains to be $13.
(c) Column (5) above gives the total profit and loss figures.
(1)
Number of Bushel
(per Day)
(2)
Price
(3)
Total Revenue
-
(4)
Total
Cost
=
(5)
Total
Profit
(6)
Marginal
Revenue
(7)
Marginal
Cost
0
$ 7
$ 0
$ 10
- $10
--
--
-1
7
7
15
- 8
$ 7
$ 5
-82
7
14
22
-8
7
7
-43
7
21
31
- 10
7
9
-3(rounded off from 3.333)4
7
28
44
-16
7
13
-45
7
35
61
-26
7
17
-5(rounded off from (5.2)