Marginal Cost of Production

The following questions refer to the following table which shows a firm's marginal cost of production.

-Refer to Marginal Cost of Production.Suppose the firm has $20 in fixed costs,and demand for the firm's product is horizontal at a price of $24 per unit.What is the firm's maximum profit?
A) $21.
B) $24.
C) $71.
D) $91.

Question

Marginal Cost of Production

The following questions refer to the following table which shows a firm's marginal cost of production.

-Refer to Marginal Cost of Production.Suppose the firm has $20 in fixed costs,and demand for the firm's product is horizontal at a price of $24 per unit.What is the firm's maximum profit?
A) $21. 
B) $24. 
C) $71. 
D) $91.

Quizplus · Accepted Answer

The firm's maximum profit is calculated by subtracting total costs from total revenue. Since the demand is horizontal at $24, the firm can sell any quantity at this price. The marginal cost is constant at $20, so the firm maximizes profit by producing where marginal cost equals marginal revenue, which is $24. The profit per unit is $24 - $20 = $4. If the firm produces 23 units, the total profit is 23 * $4 = $92. Subtracting the fixed cost of $20, the maximum profit is $92 - $20 = $72. However, since the options provided do not include $72, the closest option is $71, assuming a slight error in calculation or rounding.