A. the firm need to develop either five or 6 devices.B. SEE GRAPHC. Yes, the firm is in a competitive industry because it is a price-taker. This is obvious from the factthat price stays consistent at $$ 8$ ; furthermore, for a competitive firm the price amounts to to marginalrevenue, and the marginal revenue is exact same for each quantity.




You are watching: Consider total cost and total revenue given in the following table

Topics

How Markets Work

The Economics of Labor Markets

Firm Behavior and the Organization of Industry


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Does a firm's price equal the minimum of average full cost in the brief run, in the lengthy run or both?expalin.


Consider complete cost and also full revenue of a firm offered in the adhering to table: Quantity 0 1 2 3 4 5 6 7 8 Total Cost $ 3 5 8 12 17 23 30 38 47 Total Revenue $ 0 10 18 24 28 30 30 28 24 Inquiry 1.a.) (5 Marks) Calculate profit for each amount. How muc


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Video Transcript

Okay, So the first component of the trouble asked for us to calculate the profit for each quantity, Um And then ask us exactly how much have to affirm created to maximize profit. Well, this is pretty straightforward. So what we have the right to carry out is we're going to just subtract they full revenue less the complete expense, and also that's going to equal our profit. So for each among these columns below, we're going to go through and calculate the profit. So let's perform that ideal currently. So for the first unit, if we create zero devices, then our complete expenses is eight. So we would certainly get a profit of negative eight for that zero unit, however over below, all right. Total calls is nine. Total revenue is eight for still taking a loss. So that b negative one. All ideal, for our second unit. All ideal, now we're turning a profit, which have a profit of six. Total profits on the 3rd unit is twenty 4 minus eleven. So in that instance, we will certainly be making thirteen dollars profit over over to the following unit, and also we will be making nineteen on the five twenty one six devices, twenty one at salso units nineteenager. Now what? You jump out to you appropriate below. Is that the relocate from 6 systems 2 salso. Unit gets us much less profit. So a rationally minded, uh, business owner would certainly never before want to make this jump. You're losing money for eexceptionally for the following unit you're developing. So what's the maximum amount of profit I could make? Twenty one dollars. So? Well, how much must have firm developed to maximize profit? Well, it shouldn't issue. It need to create 6 devices of whatever before, uh, item it is making. Okay. All right, so that's profit on being asked for marginal revenue and also marginal calls for each quantity. So let's go ahead and perform that. Um, as soon as we think around marginal revenue, ideal. That's simply saying, what is the, uh, revenue from producing the next output? Right. Next item. The marginal unit. So if we're moving from zero to one. Well, just how much? What is the marginal get and revenue there? Well, so we were We used to be making zero revenue. Now we're making eight, So the are marginal revenue in that case is eight. Okay, Well, what if we relocate from one to two? All ideal. That means we're currently going to be moving from revenue of eight to sixteenager. Ah, well, again are marginal earnings. Eight. Well, you should pick up on a pattern really easily that if you go through and also execute eincredibly single one of these certain enough, the marginal revenue is eight at eincredibly rotate. So what does this tell us? Well, for every additional unit this firm is creating, it is still getting the exact same revenue from that following unit. So what does that tell us? Well, this is a price taking firm. And what does that mean? If it's a price taking firm? Well, it's in a competitive industry, which is goingto answer following suggest in, Ah, part B. But real conveniently. Let's get ago to it. Let's obtain in to our marginal social All appropriate. Margin are marginal expenses, right? That's what we're doing following. All appropriate, so here is simply the very same point. Moving area, You know, what is the difference in cost? So as we go from zero units toe one unit Marshall calls is one nine to ten. One eleven. All best, elalso to thirteenager. A means out. Just once we're going from 6 systems to salso alert that we have actually a big jump until on are marginal calls of ten. Okay, so that completes that component of the trouble. Now we should go over and graph this, and we're going to view something that picks up on this. So if we go over to our graph, you'LL notification if you plot this out effectively, that for our marginal calls, remember? Over right here. One one, one one. All right, so we have this level curve right here. Heard the instruction that claims we should plot this in a line. So as we, uh, relocate previous, what do we say? A cz. We relocated from 3 systems to four units. You'LL check out that our mortal contact starts boost. This intersects via our margin revenue, which we shelp wass Ah, flat eight for eextremely unit. And this intersects that six. What does this need to execute with one another? Well, notification that marginal revenue and also marginal cost intersect ideal at the point wright here we understand where we know that profit is maximized right tright here. That's where a profit was maximized. No surpclimb right here that that is actually where these lines intersect. So like we stated previously, it is in a competitive industry bereason we watch this really flat marshal revenue curve. And then likewise, have the right to we tell if this sector is in lengthy run equal a gram when we actually can't tell? Because we have no information on long term entry and also leave, So we carry out not recognize the answer to that question.