Reference no: EM132162906

Your company has estimated its total cost to be 

TC=5500+0.05Q+0.0006Q>2

so its marginal cost is thus 

MC=0.05+0.0012Q

MC=0.05+0.0012Q

where Q is the quantity of units produced and TC is in dollars.

Since your market is relatively competitive, your company is able to sell its output for $8.45 each, which thus yields

MR=8.45

and

TR=8.45Q

What is the optimal level of output for your company to produce/sell?

What is the marginal revenue from the last unit sold?

What is the total revenue from selling the optimal number of units?

What is the total cost from selling the optimal number of units?

What is the profit (net benefit/net revenue/etc.) from selling the optimal number of units?

An eager intern at your company suggests that, since the company earns $8.45 revenue for each unit sold, then the company could make still more profit by selling more than the level chosen in part b; why would your company not want to produce and sell more output than the level you chose in part b?

Select one:

a. At any level other than the optimum, total cost exceeds total revenue.

b. Profit becomes negative.

c. Profit increases too rapidly.

d. It reduces profit since costs increase faster than revenue.