Question

The table describes Sergei's costs for his perfectly competitive all-natural ice cream firm.
Output Total Cost($)
0 10
1 60
2 80
3 110
4 170
5 245

1. If the market price of a tub of ice cream is $67.50, how many tubs of ice cream will Sergei's firm produce?
A) 1 B) 2 C) 3
2. If the market price of a tub of ice cream is $67,50, how much is Sergei's total revenue at the profit-maximizing output?
A) S270 B) $170 C) $135 D) $67.50

Answer 1

Answer:

It will produce 4 units which enerates a total revenue of 270 dollars

Explanation:

we have to check the marginal cost (cost of the addtional unit) and produce until this cost matches the marginal revenue (in this case selling price)

1st   unit marginal cost:  60 - 10     = 50

2nd unit marginal cost:  80 - 60    = 20

3rd  unit marginal cost:  110 - 80   = 30

4th  unit marginal cost:  170 - 110  = 60

5th  unit marginal cost: 245 - 170 = 75

It get's closer that the 4th units thus , the company will produce that many units.

Total revenue at profit-maximizing output:

4 units x $67.50 each = $270