Asked by Bianca Benincasa on May 04, 2024
Verified
Refer to Figure 8.4.2 above. If the farm produces 14 sacks of coffee when market price is $380,
A) the farmer does not earn any profit.
B) the farmer has maximized his profit.
C) the farmer has lost an opportunity for additional profit.
D) the farmer should reduce the number of sacks produced in order to increase his profit.
Profit
The financial gain obtained when the amount of revenue gained from a business activity exceeds the expenses, costs, and taxes involved in sustaining the activity.
Market Price
The current price at which a good or service can be bought or sold in a market, determined by the forces of supply and demand.
Sacks
Bags made of various materials, typically used for storing or transporting items.
- Scrutinize the dynamics between total revenue, total cost, marginal revenue, and marginal cost in achieving maximum profits.
- Appreciate the manifestation of profit maximization across graphs and tables that elucidate the relationships among cost, revenue, and output levels.
- Evaluate the effects of changes in market prices on the profit-maximization condition and firm behavior.
Verified Answer
DS
dhruv sonavaneMay 07, 2024
Final Answer :
C
Explanation :
Without seeing Figure 8.4.2, we can infer that if producing 14 sacks of coffee at a market price of $380 leads to a situation where the farmer has lost an opportunity for additional profit, it suggests that at this production level, the farmer is not operating at the most efficient point. This could mean that the marginal cost of producing coffee is less than the marginal revenue (price) at 14 sacks, indicating that producing more could increase profit.
Learning Objectives
- Scrutinize the dynamics between total revenue, total cost, marginal revenue, and marginal cost in achieving maximum profits.
- Appreciate the manifestation of profit maximization across graphs and tables that elucidate the relationships among cost, revenue, and output levels.
- Evaluate the effects of changes in market prices on the profit-maximization condition and firm behavior.