What is the profit maximization for apex firm if we have the following data quantitiy /unit ={0,1,2,3,4,5,6,7,8,9,10} total variable cost =[0,100,180,220,300,390,500,640,800,1000,1250} 2. If the market price dropped to $80, what is the profit-maximizing level of output? What is Apex’s profit (or loss) in this case? 3. If the market price dropped further to $40, what is the profit-maximizing level of output? What is Apex’s profit (or loss) in this case? 4. Comment on your answers to parts (2) and (3)
What is the profit maximization for apex firm if we have the following data
quantitiy /unit ={0,1,2,3,4,5,6,7,8,9,10}
total variable cost =[0,100,180,220,300,390,500,640,800,1000,1250}
2. If the market
profit (or loss) in this case?
3. If the market price dropped further to $40, what is the profit-maximizing level of output? What
is Apex’s profit (or loss) in this case?
4. Comment on your answers to parts (2) and (3)
Profit maximization occurs at the point when Marginal Revenue is equal to the Marginal Cost. Also, after this point Marginal Cost must be increasing.
Total Revenue=Price*Quantity
MR(n)=TR(n)-TR(n-1) [where n is the quantity]
MC(n)=TVC(n)-TVC(n-1)
2. When P=$80
We have calculated the above variables in the following table:
MR is 80. It is equal to the MC at two points when the outputs 2 units and when it is 4 units. But after the units, MC is decreasing and it is increasing after 4 units of output. So, the profit-maximizing output when the price is $80 is4 units.
Profit=TR-TC
Profit=320-300=20
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