Asked by TANAJOTI CHANDRA RAJAN on Apr 29, 2024
Verified
Refer to Figure 8.4.2 above. When the coffee farmer maximizes profit, how much is his profit?
A) $116
B) $97
C) $1,624
D) $2,134
Coffee Farmer
An individual or entity engaged in the cultivation and harvesting of coffee beans.
Profit Maximized
A condition in which a firm achieves the maximum possible profit given its production costs and market conditions, often determined by the intersection of marginal cost and marginal revenue.
- Inspect the correlation between total revenue, total cost, marginal revenue, and marginal cost and its importance in profit maximization.
- Understand the conveyance of profit maximization concepts via graphs and tables that explore the nexus between cost, revenue, and output levels.
Verified Answer
HB
Hallie BrownMay 05, 2024
Final Answer :
D
Explanation :
The profit-maximizing quantity of coffee to produce is where marginal revenue (MR) equals marginal cost (MC), which is 200 pounds of coffee at a price of $8 per pound. Therefore, the total revenue (TR) is 200 x $8 = $1,600. The total cost (TC) at this output is $466, which includes $200 fixed costs and $266 variable costs. Thus, the profit is TR - TC = $1,600 - $466 = $1,134. However, since the farmer receives a subsidy of $1 per pound of coffee, the total profit is increased to $1,134 + (200 x $1) = $2,134.
Learning Objectives
- Inspect the correlation between total revenue, total cost, marginal revenue, and marginal cost and its importance in profit maximization.
- Understand the conveyance of profit maximization concepts via graphs and tables that explore the nexus between cost, revenue, and output levels.