How to do this question?

A perfectly competitive firm is currently earning £130 profit a week from selling 100 units per week. Total cost schedule is shown below. Is it maximising profit? What is the ideal profit maximising output?

Output (units) - Total Cost(£)
0 - 100
20 - 190
40 - 270
60 - 340
80 - 420
100 - 520
120 - 640
140 - 780
160 - 940
180 - 1140

Thanks :smile:

Reply 1

Oce-SH

The profit maximising output is always where MC=MR, where the cost of any additional unit would be a loss for the firm, so the law of diminishing returns. As the market is perfectly competitive, the retail price, average revenue and marginal revenue is constant. So from calculations Price per unit ( = AR = TR / Quantity) is £6.50.

TC= ATC x Output. TR = TP + TC. MC = TC2 - TC1 MR = TR2 - TR1 so adding another column to the table:

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