Quantity (Units) Price (Dollars) Total Revenue (Dollars) Total Cost (Dollars) To
ID: 2440544 • Letter: Q
Question
Quantity
(Units)
Price
(Dollars)
Total Revenue
(Dollars)
Total Cost
(Dollars)
Total Economic Profit
(Dollars)
Marginal Revenue
(Dollars)
Marginal Cost
(Dollars)
0
24
0
10
___
X
X
1
22
22
16
___
___
___
2
20
40
25
___
___
___
3
18
54
38
___
___
___
4
16
64
56
___
___
___
5
14
70
84
___
___
___
6
12
72
124
___
___
___
7
10
70
174
___
___
___
8
8
64
244
___
___
___
Using the table above, the profit-maximizing price is ______
Quantity
(Units)
Price
(Dollars)
Total Revenue
(Dollars)
Total Cost
(Dollars)
Total Economic Profit
(Dollars)
Marginal Revenue
(Dollars)
Marginal Cost
(Dollars)
0
24
0
10
___
X
X
1
22
22
16
___
___
___
2
20
40
25
___
___
___
3
18
54
38
___
___
___
4
16
64
56
___
___
___
5
14
70
84
___
___
___
6
12
72
124
___
___
___
7
10
70
174
___
___
___
8
8
64
244
___
___
___
Explanation / Answer
**There is no opportunity cost given so we assume that the total cost is also the economic cost so total economic profit = Total revenue - Total cost.**
MR = TR(n) - TR(n-1)
MC = TC(n) - TC(n-1)
The profit maximization price is that price at which MR = MC
And according to the given table the MR is almost equal to MC at price 18 and level of quantity at 3. It is so because the price at which MR = MC must be between 16 and 18 as according to the table, but we cannot take any price between them so we take a price at which the total economic profit is maximum i.e, at price 18 as profit is maximum ($16) which is maximum then profit at all other level of price.
So correct option is C) 18.
Quantity (Units) Price ($) Total Revenue ($) Total Cost ($) Total Economic Profit ($) Marginal Revenue ($) Marginal Cost ($) 0 24 0 10 -10 --- --- 1 22 22 16 16 22 6 2 20 40 25 15 18 9 3 18 54 38 16 14 13 4 16 64 56 8 10 18 5 14 70 84 -14 6 28 6 12 72 124 -52 2 40 7 10 70 174 -104 -2 50 8 8 64 244 -180 -6 70