Final answer:
To maximize profits, firms like Doggies Paradise Inc. must calculate the profit-maximizing quantity by finding where Marginal Cost equals Marginal Revenue. The total revenue, total cost, and marginal cost must be determined for output levels, enabling the identification of the quantity where profits are maximized.
The correct option is not given.
Step-by-step explanation:
The student's question relates to creating a production budget, specifically calculating the number of units needed for production based on projected sales and productivity growth. Assuming there is a mistake or incomplete data in the question regarding the expected growth percentage for March, let's address the concept of profit maximization with an example.
In a perfectly competitive market, firms like Doggies Paradise Inc. aim to maximize their profits by producing a quantity where Marginal Cost (MC) equals Marginal Revenue (MR). To find the profit-maximizing quantity, one must calculate total revenue, total cost, and marginal cost for each output level, and compare these figures.
Let's assume Doggies Paradise's scenario where the selling price is $72 per unit and the fixed cost of production is $100. The variable costs for producing one to five units are given.
The total cost (TC) for any quantity will be the sum of fixed costs and total variable costs, while total revenue (TR) is the selling price multiplied by the number of units sold. Marginal revenue (MR) in a perfectly competitive market is constant and equals the price of the product. Marginal cost (MC) is the change in total costs when production increases by one unit.
The correct option is not given.