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Chapter 24: Q.14 (page 554)

Consider the information from Problems 24-13. If the total costs of producing 13 units were equal to $72.70 per week, would the marginal revenue of producing the 13 th unit (your answer to Problem 24-13) be greater or less than the marginal cost of producing that unit? How would the firm's weekly economic profits be affected if the firm were to produce the 13 th unit?

Short Answer

Expert verified

The marginal revenue will be less than the marginal cost .

The firm's weekly economic profits will be at loss of$2.50

Step by step solution

01

Introduction

The marginal cost is the adjustment of the absolute expense that emerges when the amount created is augmented, the expense of delivering an extra amount.

02

Explanation

Given,

For producing 13units the total cost = $72.70and For producing 12units the total cost = $57.7

The marginal cost for the 13thunit is,

Total revenue at13thunit - Total revenue at12thunit

role="math" localid="1653398361429" =TR13−TR12=$72.70−$57.70=$15

The marginal revenue is

role="math" localid="1653398365880" =TR13−TR12=$70.20−$67.20=$3

The total profit is,

=$70.20−$72.70=-$2.5

Hence the firm's weekly economic profits will be at loss.

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