Question

Question 27 The following table gives you cost and revenue information for Mac & Kayla's Stacked Sandwiches, which are sold in a perfectly competitive market. Sandwiches Total Cost Variable Cost Average Total Cost Marginal Cost Revenue $20 530 $19 0 1 2. 3 4 5 $28 564 $21 590 SBB Use the above information. Answer in an integer format, with no commas, dollar signs, or decimals. What is Mac and Kayla's profit-maximizing quantity?

Answer 1

А B D E F Sandwiches(Q) Total Cost ($) Variable Cost($) Average Total Cost ($)(TC/0) Marginal Cost($)(DTC/do) Revenue 0 20 0 0 1 301 10 30 10 18 2 38 19 8 36 3 48 28 16 10 54 4 64 44 16 16 72 5 65 17 21 90 6 108 88 18 23 108 18 85 Note: Red coloured digits were unknown and black coloured digits were given. Here, at Q=4, profit is maximum = Revenue - Total Cost = 72 - 64 = 8

• When Q = 0, TC = 20, which is a fixed cost (FC) and there is no variable cost (VC) because of 0 Q.
• At Q = 1, TC = 30, i.e., FC = 20, VC =TC – FC = 30 – 20 = 10, ATC = (TC/Q), MC = (TC₁ - TC₀)/(Q₁ – Q₀) = (30 – 20)/(1 – 0) = 10
• At Q = 2, TC = 38(ATC = 19 is given, so TC = ATC * Q = 19*2), i.e., FC = 20, VC = TC – FC = 38 – 20 = 18, MC = (TC₂ - TC₁)/(Q₂ – Q₁) = (38 – 30)/(2 – 1) = 8
• At Q = 3, TC = 48(VC = 28 is given, so TC = VC + FC = 28 + 20), ATC = (TC/Q), MC = (TC₃ - TC₂)/(Q₃ – Q₂) = (48 – 38)/(3 – 2) = 10
• At Q = 5, TC₅ = MC₅ + TC₄ = 64 + 21
• At Q = 5, TR(Total Revenue) = P * Q = 90, so P = 90/5 = 18
• At Q = 0, TR(Total Revenue) = P * Q = 18 * 0 = 0
• At Q = 1, TR(Total Revenue) = P * Q = 18 * 1 = 1
• At Q = 6, TR(Total Revenue) = P * Q = 18 * 6 = 108
• Here, at Q = 4, profit is maximum = Revenue - Total Cost = 72 - 64 = 8

Hope all the explanations are clear to you. Thank you.