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ASSIGNMENT
A. Complete the following table and accomplish the task that follow.
2. What is the maximum profit output when price is 12? Output 6 if it is in Perfect Competition.
TR = 12 x 6 units = 72
=72-62
Compute the total revenue and the profit. Compute the profit using the average cost figures.
PRICE TR TP
12 12 -10
12 24 11
12 36 25.33
12 48 38
12 60 38
12 72 61.14
12 84 73.14
12 96 84.50
12 108 95.78
12 120 107
=72- (10.33 x 6)
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Total Maximum Profit = 10.02
3. Using the MC figure, compute the change in profit and the new profit level with an additional
unit produced beyond the maximum profit.
Profit = (P x Q) – TC
New Profit = 90
= 90 – 70
4. Again, using the MC figure, compute the same variable with output reduced by one (1) unit from
the said point.
Let; Q = 9; P = 18;
Profit = (P x Q) – TVC
= (9 x 18) – 110
New Profit = 52
= 52 – 70
B. Illustrate the effects of the following on the following on the MC, AC, and MR curves.
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b. Increase in wages and salaries
Decrease in efficiency will result to increase the cost incremental to production. Thus,
will lead the same effect in AC and MC given in scenario (b). However, it will lower down its
revenue and MR will shift downward [see figure in given (a)].
C. Using the MC and MR curves, predict the effect of the following on profit.
b. Higher price
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More efficient machine will reduce its costs and increase productivity and production rate.
Hence, due to reduction in costs, MR curve will shift upward. There are no effects in MC
curve.
__ D___ 1. The use of something should pay for its opportunity foregone to indicate _____.
a. Addition
b. Reduction
c. Change
d. Net change
___ D__ 2. Based on the foregoing, the best alternative is hat which _____.
a. Gives the most benefit
b. Gives the most addition to benefit
c. Has the most opportunity cost
d. B and c
e. A and c
__D___ 6. The condition that underlies the shape of the average cost curve.
a. Returns to scale
b. Law of Diminishing returns
c. Shutdown price
d. Long-run cost curves
__A___ 7. When marginal cost increases, marginal product in the production function _____.
a. Decreases
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b. Increases
c. Does not change
d. Is zero
__A___ 8. Given a certain price, profit decreases when the output level causes MC to be greater than MR
affecting _____.
a. Revenue and variable cost
b. Revenue and fixed cost
c. Least of the lowest cost
d. Fixed cost
__A___ 10. Producing short of MR=MC means lower profit because _____.
a. MC is greater than MR
b. MR is greater than MC
c. Revenue is less
d. Of lower cost
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