HW 5A and 5B

Sergio Nicholas Arifin

Maria Tarmidi
Bella Gabrielle

Answer to 5A

Output (Q) MR (P) Total Cost MC Tot Revenue Total Profit

0 3 60 0 0 -60

10 3 90 3 30 -60

20 3 110 2 60 -50

30 3 120 1 90 -30

40 3 125 0.5 120 -5

50 3 135 1 150 15

60 3 150 1.5 180 30

70 3 175 2.5 210 35

80 3 225 5 240 15

Q: At which output, the profit reaches its maximum?

A: Total profit will be maximised if the Marginal Revenue = Marginal Cost.
Marginal Revenue = ΔChange in Revenue ÷ ΔChange in Quantity
Marginal Cost = ΔChange in Cost ÷ ΔChange in Units (Q)
The table above has given an explanation about the maximum profit by the highlighted area.

Answer to 5B

We shall not produce it because then our marginal revenue would be less than the marginal
cost. How do we know this?

First, we find the marginal revenue which is $1,5 that is the payment the buyer offered us for the
additional box.

Then, we find the marginal cost which comes from:

100 x $1.00 = $100
101 x $1.01 = $102.1

$102.1 - $100 = $2.01

$2.01 when compared with $1.5 is bigger. Meaning, we'll suffer a loss if we still insist on
producing it.