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Finding optimal output level

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Total Output (Q) Total Price (P) Total Revenue (TR) Total Cost (TC)
0 1900 0 1000
1 1700 1700 2000
2 1650 3300 2800
3 1600 4800 3500
4 1550 6200 4000
5 1500 7500 4500
6 1450 8700 5200
7 1400 9800 6000
8 1350 10800 7000
9 1300 11700 9000

A. Use the following to calculate profit at each quantity of output.

B. Use the table in exercise A to calculate marginal revenue and marginal cost

C. Use the information in A and B to graphically show maximum profit.
Label the profit-maximizing quantity and price, total cost, total revenue, and profit.

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Solution Summary

Solution describes the methodology to find out the optimal output level. It also calculates associated profit with optimal output level.

Solution Preview

Please refer attached file for graph and better clarity of tables.

Total Output(Q) Total Price (P) Total Revenue (TR) Total Cost (TC) Total Profit MC* MR**
TR-TC
0 1900 0 1000 -1000
1 1700 1700 2000 -300 1000 1700
2 1650 3300 2800 500 800 1600
3 1600 4800 3500 1300 700 1500
4 1550 6200 ...

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  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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