Q.3 Look at Table 8.13. What would h... [FREE SOLUTION]

Chapter 8: Q.3 (page 210)

Look at Table 8.13. What would happen to the firm鈥檚 profits if the market price increases to $6 per pack of raspberries?

Short Answer

Expert verified

If the market price of raspberries rises to $$ 6$ per pack, the firm's profit is $$ 216$ .

Step by step solution

Definition

Profit maximization is the process by which a firm determines the cost, input levels that result in the highest profit. In the profit maximization, price, and quantity are at that point where MC=MR.

Explanation

Profit maximizing condition under perfect competition is P=MC. When P= $$ 4$ , profit-maximizing output = $80$ raspberries because at this output level, MC

$= \frac{(230 - 190)}{(80 - 70)} = $ 4$

which is equals to price, profit = $$ 90$

when market price increases to $$ 6$ per pack of raspberries, profit-maximizing output = $90$ raspberries because at this output level, MC

= \frac{(324 - 264)}{(90 - 80)} = $ 6

which is equal to the price.

Therefore, the firm's profit:

$= T R - T C = $ (6) (90) = $ 216$

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Look at Table 8.13. What would happen to the firm鈥檚 profits if the market price increases to $6 per pack of raspberries?

Short Answer

Step by step solution

Definition

Explanation

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