Purchase Solution

Selecting the optimal output level

Not what you're looking for?

Ask Custom Question

Marginal revenue product is defined as the change in total revenue that results from the employment of an additional unit of a resource. A producer wishes to determine how the addition of pounds of plastic will affect its MRP and profits. See the table in the attached file and answer each of the questions.

a. The marginal product of the 3rd pound of plastic is ________.
b. The marginal revenue product of the 3rd pound of plastic is ______.
c. The price of plastic is $135 per pound. To maximize profit, the producer should produce
__________________.
d. The price of plastic is $135 per pound. To maximize profit, the producer should buy and use:
________________.

Attachments
Purchase this Solution
Solution Summary

This solution depicts the steps to choose the optimal output level in the given case.

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
Recent Feedback
  • "Thank you"
  • "Really great step by step solution"
  • "I had tried another service before Brain Mass and they pale in comparison. This was perfect."
  • "Thanks Again! This is totally a great service!"
  • "Thank you so much for your help!"
Purchase this Solution
Free BrainMass Quizzes
Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

View More Free Quizzes
Related BrainMass Solutions

  • Selecting optimal output level

    309141 Selecting optimal output level Please refer problem 3 from the attached file for graph. The accompanying graph (bottom of this page) summarizes the demand and costs for a firm that operates in a monopolistically competitive market. a.

  • Finding optimal number of output

    A horizontal line from P=$10, cuts the MC curve at a point where Q=100 units. It is the optimal output level. A vertical line from the optimal point cuts ATC curve at a point where ATC is $8.

  • Finding optimal production level

    steps to calculate optimal level of output level and checks whether it should continue or shut down its operations at the current level.

  • Finding Optimal Output Level etc.

    We find that despite firm will make a loss at all output levels. It can minimize its losses by selecting this output level.

  • revenues at the optimal level of output

    We can find the maximum by looking at the sign of the second derivative, evaluated at the two solutions. b) What are revenues at the optimal level of output? c) what are costs at the optimal level of output?

  • Decision Making

    Solution to second problem demonstrates the methodology to find optimal output level in the given cases.

  • Determining an optimal allocation of output

    So, firm will not choose output level after 3000 cubic yards ) Optimal output of Hard Stuff Inc.=2 (000) (After this output level MC>MR.

  • Find the optimal production in the given case

    We observe that the current level of output is 55,000 units while the profit-maximizing output is 60,000. The current level of output is less than the optimal output. So, we should increase the output level to increase profit.

  • Short Run Profit Margin

    What happens to profit if output is below or above the optimal output level? If the output is below the optimal output level, or Q<7, MC is lower than ATC. For example, MC is 1.50 and ATC is 4.45 when Q = 5.

View More Related Solutions