Demand and Total Cost of Production

The following questions refer to the following tables which show the demand for a firm's product and the firm's total cost of production.

-Refer to Demand and Total Cost of Production.The profit from selling three units would be
A) $60.
B) $39.
C) $21.
D) $10.

Question

Demand and Total Cost of Production

The following questions refer to the following tables which show the demand for a firm's product and the firm's total cost of production.

-Refer to Demand and Total Cost of Production.The profit from selling three units would be
A) $60. 
B) $39. 
C) $21. 
D) $10.

Quizplus · Accepted Answer

To find the profit from selling three units, we need to first calculate the total revenue and total cost. 
Total Revenue = Price x Quantity = $35 x 3 = $105

Total Cost = Fixed Cost + Variable Cost 
Fixed Cost = $10 
Variable Cost = $8 x 3 = $24 
Total Cost = $10 + $24 = $34

Profit = Total Revenue - Total Cost = $105 - $34 = $71

However, this profit is for selling all 5 units. To find the profit from selling only 3 units, we need to subtract the cost of producing the remaining 2 units. 
Cost of producing 2 units = Variable Cost x 2 = $8 x 2 = $16

Profit from selling 3 units = Total Revenue - Total Cost - Cost of producing 2 units 
= $105 - $34 - $16 = $55

Therefore, the profit from selling three units would be $55. 
Option B is the correct choice.