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ECF1100: MICROECONOMICS Answers to tutorial 6 Chapter 6, Problem 2 When price is \$120, the firm should quantity where marginal cost is \$120. Since the following table does not tell us where marginal cost is 120, we consider two quantities closest to MC = 120, 6 where MC = 105 and 7 where MC = 140. Since the seventh unit incurs MC = 140 which is larger than price = 120, the firm should produce 6 units. Air conditioners/day Total cost (\$/day) Marginal cost (\$/air conditioner) 1 100 - 2 150 50 3 220 70 4 310 90 5 405 95 6 510 105 7 650 140 8 800 150 Chapter 6, Problem 3 a. As indicated by the entries in the last column of the table below, the profit- maximising quantity of bats for the Big Hitter Company is 20 per day, which yields a daily profit of \$35. When Q = 20, marginal cost is 45/5 = 9, which is closest to price = 10 but still less. If Q = 25, then MC = 60/5 = 12, which is larger than price. So Q = 20 is profit-maximising. Q (bats/day) Total revenue (\$/day) Total labour cost (\$/day) Total cost (\$/day) Profit (\$/day) 0 0 0 60 -60 5 50 15 75 -25 10 100 30 90 10 15 150 60 120 30 20 200 105 165 35 25 250 165 225 25 30 300 240 300 0 35 350 330 390 -40 b. The profit-maximising quantity of bats for the Big Hitter Company is again 20 per day, but now profit is \$65, or \$30 more than before.

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