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Graphs and Charts: Unit 2-Assignment 1-Web Prob 1
Your completed table should look like this:
|
Q |
FC |
VC |
TC |
MC |
ATC |
AVC |
TR |
MR |
|
0 |
50 |
0 |
50 |
----- |
----- |
0 |
0 |
----- |
|
1 |
50 |
5 |
55 |
5 |
55 |
5.00 |
26 |
26 |
|
2 |
50 |
12 |
62 |
7 |
31 |
6.00 |
52 |
26 |
|
3 |
50 |
25 |
75 |
13 |
25 |
8.33 |
78 |
26 |
|
4 |
50 |
46 |
96 |
21 |
24 |
11.50 |
104 |
26 |
|
5 |
50 |
75 |
125 |
29 |
25 |
15.00 |
130 |
26 |
|
6 |
50 |
112 |
162 |
37 |
27 |
18.67 |
156 |
26 |
|
7 |
50 |
153 |
203 |
41 |
29 |
21.86 |
182 |
26 |
|
8 |
50 |
198 |
248 |
45 |
31 |
24.75 |
208 |
26 |
What is the profit-maximizing level of production? Use the MR = MC method. The answer is Q= 4. At Q = 5, MR = 26 but MC has risen to 29, so Q = 5 doesn't work. You can use the secondary approach of TR-TC to verify that Q= 4 is the most profitable quantity of output.
What is the lowest acceptable price in the long-run? (If the firm doesn't receive at least this much, it must go out of business.) Check the ATC column and find the lowest entry. The answer is $24 at Q = 4. Note that total costs of $96 would be covered (4 x 24).
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