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Suppose Chris is a potter who makes mugs. His total costs depend on the number of mugs he makes...

Question:

Suppose Chris is a potter who makes mugs. His total costs depend on the number of mugs he makes each day, as shown in the table below.

Number of Mugs Per Day Total Cost Per Day
0 $10
1 $14
2 $19
3 $25
4 $32
5 $40
6 $49

If the market for mugs is perfectly competitive, and mugs sell for $7.50 each, then Chris should make _____ mugs per day. (0, 4, 5, or 6)

Marginal Cost:

Marginal cost is the increase in total cost of production when an additional output is produced. To maximize profit, a firm will produce until marginal revenue is equal to marginal cost.

Answer and Explanation: 1

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In a competitive market, profit-maximizing output is where marginal cost is equal to price. We first compute the marginal cost, which is the addition...

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Profit Maximization: Definition, Equation & Theory

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Chapter 24 / Lesson 6
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Learn the profit maximization definition, its importance, and explore the profit maximization theory. See how to calculate profit maximization with examples.


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