Homework Answers
Answer
the firm produces at MC=P to maximize profit
MC(n)=(TC(n)-TC(p))/(n-p)
MC(n)=marginal cost of n th unit
TC(n)=Total cost of n units of output
TC(p)=Total cost of p unit of output
here, n>p.
MC(25)=(75-70)/(25-20)=1 and so on
| Q | TC | MC |
| 20 | 70 | |
| 25 | 75 | 1 |
| 30 | 85 | 2 |
| 35 | 100 | 3 |
| 40 | 125 | 5 |
| 45 | 155 | 6 |
| 50 | 190 | 7 |
the MC=P at Q=40 units
Option 1
the firm produces 40 units where profit is maximum
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