Question

The table shows the costs that a firm faces when producing corn in a perfectly competitive market. Use it to answer the following questions. Show your work. Quantity (bushels) | 0 1 2 3 4 5 6 7 8 9 10 Total Cost (dollars) | 36 | 46 | 54 | 64 | 65 | 69 | 77 | 92 | 117 | 160 If the price for corn is $7 per bushel, how much profit or loss will the farm have?

Answer 1

Price = $7

Total Revenue = Price * Quantity sold

Marginal Revenue = Additional Revenue per unit sold = Price / Marginal Revenue

Marginal Cost = Additional cost per unit produced

Quantity	Total Cost	Marginal Cost	Total Revenue	Marginal Revenue
0	36	-	0	-
1	46	10	7	7
2	54	8	14	7
3	60	6	21	7
4	64	4	28	7
5	65	1	35	7
6	69	4	42	7
7	77	8	49	7
8	92	15	56	7
9	117	25	63	7
10	160	43	70	7

Producer will produce at a point when MR = MC or they are close to each other. In the above table, they are close to each other when 7 units are produced. Total cost at this output level is 77 while total revenue is 49 which result in total loss of 77 - 49 = 28.