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Question
Study the supply curve given below and answer the following question.
For the supplier, when the marginal cost of producing a unit is $2, his profit is maximized. What will be his total revenue?
Study the supply curve given below and answer the following question.
For the supplier, when the marginal cost of producing a unit is $2, his profit is maximized. What will be his total revenue?
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Solution
The correct option is C $8
Profit maximization occurs when MC = P. Since his profit maximization occurs at a marginal cost of $2, the market price is also $2. At this price, he would supply 4 units.
TR=P×Q=$2×4=$8
$8
Profit maximization occurs when MC = P. Since his profit maximization occurs at a marginal cost of $2, the market price is also $2. At this price, he would supply 4 units.
TR=P×Q=$2×4=$8
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