11508-22-6P

AID: 1825 | 22/01/2015

Marginal cost:
Marginal cost can be calculated by using the following formula.
Marginal cost Total cost current Total cost previous
(1)
Table-1 shows the value of marginal cost by using Equation (1).
Table 1

Total cost
after tax
per unit
10

17

17 10 7

26

26 17 9

37

37 26 11

50

50 37 13

65

65 50 15

82

82 65 17

101

101 82 19

122

122 101 21

145

145 122 23

10

170

170 145 25

Quantit
y

Marginal Cost

a. Total cost after tax per unit:

Total cost after tax per unit can be calculated by using the following formula.
Total cost after tax Total cost Tax per unit Quantity
(2)
Table-1 shows the value of total cost after tax by using Equation (1) and (2).
Table 1
Quantit
y
0

Total cost after

tax per unit
10 2 0 10

Marginal Cost
-

17 2 1 19

19 10 9

26 2 2 30

30 19 11

37 2 3 43

43 30 13

50 2 4 58

58 43 15

65 2 5 75

75 58 17

82 2 6 94

94 75 19

101 2 7 115

115 94 21

122 2 8 138

138 115 23

145 2 9 163

163 138 25

10

170 2 10 190

190 163 27

Output for maximizing profit at tax per unit $2 :

A firm can maximize its profit at the point where its marginal cost is equal to its marginal
revenue. Marginal revenue for this product is equal to its price $19. Table -1 reveals that
marginal cost is $19 at the output level 6 units. Thus, profit is maximized at the output
level of 6 units.
b. Total cost after property tax:
Total cost after tax property tax can be calculated by using the following formula.

Total cost after tax Total cost Property tax

(3)
Table-1 shows the value of total cost after tax by using Equation (1) and (3).
Table 1

Quantit
y
0

Total cost after

property tax
10 2 12

17 2 19

19 12 7

26 2 28

28 19 9

37 2 39

39 28 11

50 2 52

52 3*9 13

65 2 67

67 52 15

82 2 84

84 67 17

101 2 103

103 84 19

122 2 124

124 103 21

145 2 147

147 124 23

10

170 2 172

172 147 25

Marginal Cost
-

Output for maximizing profit at property tax $2:

A firm can maximize its profit at the point where its marginal cost is equal to its marginal
revenue. Property tax does not change the marginal cost of the firm. Marginal revenue for
this product is equal to its price $19. Table -1 reveals that marginal cost is $19 at the
output level 7 units. Thus, profit is maximized at the output level of 7 units.
c. Profit tax:
A firm can maximize its profit at the point where its marginal cost is equal to its marginal
revenue. Since tax is paid for the profit, it does not change the marginal revenue.
Marginal revenue for this product is equal to its price $19. Table -1 reveals that marginal
cost is $19 at the output level 7 units. Thus, profit is maximized at the output level of 7
units.