a) The marginal revenue of the firm is defined as the extra revenue a firm is able to generate when it produces and sells one more unit of output in the market. On the other hand, the marginal cost of a firm is defined as the extra cost a firm incurs when it produces one more unit of output. The table below shows the marginal revenue and marginal cost of the firm associated with the various output levels of the firm. Quantity Price in terms of RM Total revenue in terms of RM Marginal revenue Total cost in terms of RM Marginal cost 1 6 6 - 5 - 2 6 12 6 8 3 3 6 18 6 12 4 4 6 24 6 17 5 5 6 30 6 23 6 6 6 36 6 30 7 7 6 42 6 38 8 8 6 48 6 47 9 b) A firm maximizes profit by producing at an output level where the marginal revenue of the firm becomes equal to the marginal cost of the firm. As we can see in the table given above that when the firm produces and sells 5 units of output at the price of 6 RM per unit then the firm marginal revenue becomes equal to its marginal cost so we can say that equilibrium outp[ut of the firm is equal to 5 and the equilibrium price is equal to 6 RM. c) As we can see in the table given in part "A" above when the firm produces and sells 5 units of output then the total revenue of the firm is equal to 30 and the total cost the firm incurs when it produces 5 units of output are equal to 23 so the total profit of the firm can be calculated as follows Total Profit = Total revenue − Total cost t Total Profit = 30 − 23 Total Profit = 7 So, the firm is earning 7RM as the profit at the equilibrium output level. d) Is the firm operating in a perfect or imperfect market and is the? e) And is the firm earning supernormal profit, subnormal profit or normal profit?
a) The marginal revenue of the firm is defined as the extra revenue a firm is able to generate when it produces and sells one more unit of output in the market. On the other hand, the marginal cost of a firm is defined as the extra cost a firm incurs when it produces one more unit of output. The table below shows the marginal revenue and marginal cost of the firm associated with the various output levels of the firm.
| Quantity | Total revenue in terms of RM | Marginal revenue | Total cost in terms of RM | Marginal cost | |
| 1 | 6 | 6 | - | 5 | - |
| 2 | 6 | 12 | 6 | 8 | 3 |
| 3 | 6 | 18 | 6 | 12 | 4 |
| 4 | 6 | 24 | 6 | 17 | 5 |
| 5 | 6 | 30 | 6 | 23 | 6 |
| 6 | 6 | 36 | 6 | 30 | 7 |
| 7 | 6 | 42 | 6 | 38 | 8 |
| 8 | 6 | 48 | 6 | 47 | 9 |
b) A firm maximizes profit by producing at an output level where the marginal revenue of the firm becomes equal to the marginal cost of the firm. As we can see in the table given above that when the firm produces and sells 5 units of output at the price of 6 RM per unit then the firm marginal revenue becomes equal to its marginal cost so we can say that equilibrium outp[ut of the firm is equal to 5 and the
c) As we can see in the table given in part "A" above when the firm produces and sells 5 units of output then the total revenue of the firm is equal to 30 and the total cost the firm incurs when it produces 5 units of output are equal to 23 so the total profit of the firm can be calculated as follows
Total Profit = Total revenue − Total cost t
Total Profit = 30 − 23
Total Profit = 7
So, the firm is earning 7RM as the profit at the equilibrium output level.
d) Is the firm operating in a perfect or imperfect market and is the?
e) And is the firm earning supernormal profit, subnormal profit or normal profit?
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