Final answer:
This prompt involves calculating total revenue, marginal revenue, total cost, and marginal cost for a competitive firm and finding the profit maximizing quantity of dog coats sold. The analysis is done by constructing a table and graphing relevant curves to identify where marginal revenue equals marginal cost.
Step-by-step explanation:
The question regards the calculation of total revenue, marginal revenue, total cost, and marginal cost for a perfectly competitive firm, Doggies Paradise Inc., and the identification of the profit maximizing quantity of dog coats sold. To find these values, a table must be constructed with output levels from one to five units. The price per unit is $72, and fixed costs are $100, with variable costs increasing with each additional unit produced. The total revenue (TR) is the price multiplied by the quantity sold, while the marginal revenue (MR) is the additional revenue from selling one more unit. Total cost (TC) is the sum of fixed costs and variable costs at each output level, and marginal cost (MC) is the change in total costs when production is increased by one unit. The profit maximizing quantity is determined where MR equals MC or where the additional cost of producing one more unit no longer yields an additional profit.
Total Revenue and Total Cost Curves
Sketching these curves will show the relationship between the cost of producing dog coats and the revenue generated from sales at different production levels. The TR curve shows a steady increase as more units are sold, while the TC curve reflects the fixed costs and the upward slope as variable costs increase with higher output.
Marginal Revenue and Marginal Cost Curves
Graphing MR against MC allows for visual determination of the profit maximizing output, which is the point where the two curves intersect. This indicates that producing any more units beyond this point will not increase profit.