According to the table below, *Note that output levels are calibrated in hundreds in this
example; that's why we have divided the change in total costs and revenues from one output
level to another by 100 to calculate marginal revenue and marginal cost. Very few manufacturers
deal in units of 1. (a) What were the fixed costs of production for the firm? Instructions: Enter
your response as a whole number. $ (b) At what rate of output was profit per computer
maximized? (Choose the highest output level.) computers per month (c) At what output rate was
total profit maximized? (Choose the highest output level.) computers per month
Solution
a.
at zero level of output cost = $60,000 and it is only the fixed cost that incurs at zero level of
output.
So, Fixed cost = $60000
b.
at 400 level of production
Total profit = $160000
So, profit per computer = 160000/400 = $400
and it is the maximum profit per computer that can be earned.
c.
Profit maximization happens when
Marginal revenue = Marginal cost
and above condition holds true at the production level of 600 outputs.
total profit earned at this level of 600 output = $180000