Quantity
Total Revenue
Total
Cost
21
$210
$138
22
$220
$145
23
$230
$154
24
$240
$165
The firm’s profit-maximizing output (in units) is most likely:
A. 21.
B. 23.
C. in excess of 24.
Answer = B
The explanation is that MC=MR=$10. But at 23 MC=$9
Can someone explain why B is correct
I trust that you see that MR = $10.
The maximum profit occurs when MC = MR, so we need to determine when MC = 10.
We cannot determine the marginal cost for unit 21 (we have no data for the total cost for 20 units).
The marginal cost for unit 22 is $145 − $138 = $7.
The marginal cost for unit 23 is $154 − $145 = $9.
The marginal cost for unit 24 is $165 − $154 = $11.
Thus, marginal profit for unit 23 is positive ($10 − $9 = $1), but marginal profit for unit 24 is negative ($10 − $11 =−$1). Thus, 24 units is too many; produce and sell 23.