a)
The firm’s marginal cost at each quantity.
a)
Explanation of Solution
Q (tomatoes) | Variable cost | Total cost | Marginal cost |
0 | $0 | $14 | |
1 | 16 | 30 | 16 |
2 | 22 | 36 | 6 |
3 | 30 | 44 | 8 |
4 | 42 | 56 | 12 |
5 | 58 | 72 | 16 |
6 | 78 | 92 | 20 |
7 | 102 | 116 | 24 |
Marginal cost is calculated as:
MC = TCn-1-TCn where TCn-1 is the new total cost and TCn is the old total cost
Then MC for first unit:
MC for the second unit:
MC for the third unit:
MC for the fourth unit:
MC for the fifth unit:
MC for the sixth unit:
MC for the seventh unit:
Introduction: The difference in overall production costs caused by creating or producing one more unit is known as the marginal cost.
The profit is calculated by subtracting the total cost from the total revenue of the product.
b)
The firm’s profit-maximizing level of output
b)
Explanation of Solution
Q (tomatoes) | Variable cost | Total cost | Marginal cost | Total revenue | Profit |
0 | $0 | $14 | |||
1 | 16 | 30 | 16 | 14 | (16) |
2 | 22 | 36 | 6 | 28 | (8) |
3 | 30 | 44 | 8 | 42 | (2) |
4 | 42 | 56 | 12 | 56 | 0 |
5 | 58 | 72 | 16 | 70 | (2) |
6 | 78 | 92 | 20 | 84 | (8) |
7 | 102 | 116 | 24 | 98 | (18) |
Total revenue is determined as
= Price×Quantity
1st unit
2nd unit
3rd unit
4th unit
5th unit
6th unit
7th unit
Then, profit is the difference of TC and TR where TR is the total revenue and TC is the total cost
The firm’s profit-maximizing level of output would be at unit 4 because at this level of quantity the firm is experiencing the highest level of profit which is zero but from other units, the firm is experiencing loss.
Introduction: The difference in overall production costs caused by creating or producing one more unit is known as the marginal cost.
The profit is calculated by subtracting the total cost from the total revenue of the product.
c)
Firm’s profit at the profit-maximizing level of output
c)
Explanation of Solution
The firm’s maximum profit is at quantity 4 which means the firm’s profit at this quantity would be the difference between total revenue and total cost.
Introduction: The difference in overall production costs caused by creating or producing one more unit is known as the marginal cost.
The profit is calculated by subtracting the total cost from the total revenue of the product.
Chapter 58 Solutions
Krugman's Economics For The Ap® Course
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