Asked by Giovanni Magana on Apr 24, 2024
Verified
The profit maximizing level of output for this farmer is
A) 6.
B) 9.
C) 12.
D) 3.
Profit Maximizing
The process of adjusting production and sale levels to achieve the highest possible profit based on existing market conditions.
Level of Output
The quantity of goods or services produced by a company, industry, or economy within a given period.
Farmer
An individual engaged in agriculture, raising living organisms for food or raw materials.
- Evaluate the output level that results in maximal profit or minimal loss for a company.
Verified Answer
From the given table, we can calculate the marginal cost (MC) by finding the change in total cost for each additional unit of output. For example, to produce 6 units, the total cost is $40, and to produce 9 units, the total cost is $60. This means the marginal cost of producing the 3rd unit is $20 (the difference between $60 and $40).
Similarly, we can find the marginal revenue (MR) by looking at the change in total revenue for each additional unit of output.
For example, producing 6 units will generate a revenue of $60, and producing 9 units will generate a revenue of $90. The marginal revenue of the 3rd unit is $30 (the difference between $90 and $60).
Now, we can compare the marginal revenue and marginal cost to find the profit-maximizing output level.
At 12 units, the marginal revenue is $30, and the marginal cost is $30 as well. Therefore, producing 12 units would maximize the farmer's profit.
Learning Objectives
- Evaluate the output level that results in maximal profit or minimal loss for a company.
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