Question

For the pizza seller whose marginal, average variable, and average total cost curves are shown in the graph below, what is the profit-maximizing level of output and how much profit will this producer earn if the price of pizza is $0.50 per slice?

 Instructions: In the graph below, label all three curves by double-clicking on the ?? to select the appropriate label.

When the price is S0.50 per slice, the profit-maximizing level of output is _______  slices per day.

At the profit-maximizing level of output, the producer's profit is: $_______ per day.

Answer 1

Answer 2

P = $ 0.5

Since P < min AVC (shutdown point) :

Profit maximizing level of output = 0 slices per day

Profit = - Fixed cost = - (1.25 - 0.75) x 300 = - $ 150 per day (loss)