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Calculate the Profit-Maximizing Price
Economics
To calculate the profit-maximizing price and output level of the firm, the paper starts from price $10 to $200. The paper uses the Excel software to calculate the quantity, revenue, marginal revenue, variable costs, total costs and marginal costs. The fixed costs of the firm are $120, which does not change no matter the level of quantity produced.
However, the variable costs decline with the increase in the quantity produced. The marginal costs remain the same.
Based on the calculation in the Table 1, the profit-maximizing price is $120, which is the price the marginal revenue reaches its peak at $2,590. The increase in production at this level will make the marginal revenue to decline from $2,590 to ($2,410) as being revealed in the Table...
As the firm increases the production, the total revenue increases, however, when the total revenue reaches $361,080, this is the point marginal revenue reaches its maximum. Increase in further production will make the marginal revenue to decline further. (Mankiw, 2011).
Table 1: All in U.S.$ Except Quantity
TC= FC+VC
Price ($)
Quantity
Total Revenue
Marginal Revenue
Fixed Costs
Variable Costs
Total costs
Marginal
on the MC, D and MR in the curves below in the Fig 1, the equilibrium point is where the marginal revenue cut the quantity from below. At the equilibrium point, the marginal revenue is $2, 590 and the quantity is 3,009 while marginal cost is $624,875
(ii) The…
Reference
Mankiw, G.N. (2011). Principle of Economics.( Sixth Edition). Cengage Learning.USA.
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