Question

Subject Microeconomics

Quantity	AFC	AVC	ATC	TC	MC	MR	Profit/loss
1	60	45			---	56
2	30	42.5
3	20	40
4		37.5
5		37
6		37.5
7		38.57
8		40.63
9		43.33
10		46.5

Week 2: Problem: Profitability

Answer 1

Since no information on marginal revenue is given we will consider it to be constant.

Hence profits will be calculated as:

Profit = (Marginal revenue*Quantity) - Total Cost

Quantity	AFC	AVC	ATC	TC	MC	MR	Profit/Loss
1	60	45	105	105	-	56	-49
2	30	42.5	72.5	145	40	56	-33
3	20	40	60	180	35	56	-12
4	15	37.5	52.5	210	30	56	14
5	12	37	49	245	35	56	35
6	10	37.5	47.5	285	40	56	51
7	8.57	38.57	47.14	330	45	56	62
8	7.5	40.63	48.13	385	55	56	63
9	6.67	43.33	50	450	65	56	54
10	6	46.5	52.5	525	75	56	35

Hence we can see that Profits are maximised at q = 8 where profits = 63.