In the table below are given the output (X), T.C., and Price for a firm. Complete the following table and then answer the questions at the bottom of the table.
|X||T.C||P=A.R=52||T.R||A.T.C||M.C||M.R||Exact Profit (+)or (-) Loss|
a. The profit maximization level of output (PMS) for a price of $52 is _____ units of output with a (proft/loss) _____ of $ _____.
b. At various prices below, indicate the Quantity Supplied and its corresponding Profit or Loss (exact amount)
|Price||Quanitty Supplied||Profit or Loss|
What is the profit maximization rule?
The profit maximization rule states that firms should always produce at the level where Marginal Revenue (MR) equals Marginal Cost (MC). That level will maximize profit because the next to last unit has a higher MR than MC, so not producing it leaves money on the table. Producing beyond the level where MR=MC means that the cost exceeds the revenue, which doesn't make sense for a profit-maximizing firm.
Answer and Explanation: 1
a. The profit maximization level of output (PMS) for a price of $52 is 9 units of output with a profit of $90.
b. At various prices below, indicate...
See full answer below.
Learn more about this topic:
fromChapter 24 / Lesson 6
Learn the profit maximization definition, its importance, and explore the profit maximization theory. See how to calculate profit maximization with examples.