Question

Question content area mallard corporation uses the product cost concept of product pricing. the cost information for the production and sale of 45,000 units of its sole product follows. mallard desires a profit equal to a 12?

Answer 1

To find the profit-maximizing quantity for Doggies Paradise Inc., we need to calculate and compare total revenue, marginal revenue, total cost, and marginal cost across different output levels. Marginal cost and revenue indicate the profit-maximizing quantity at their intersection. Diagrams of the total revenue and cost, and marginal revenue and cost curves, provide visual aids for this analysis.

Step-by-step explanation:

To determine the profit-maximizing quantity for Doggies Paradise Inc., we need to calculate total revenue, marginal revenue, total cost, and marginal cost for each output level from one to five units. Total revenue is equal to the number of units sold multiplied by the price. In the case of Doggies Paradise Inc., if one dog coat sells for $72, the total revenue for one unit would be $72. As a perfectly competitive firm, the marginal revenue is equal to the price of the product, which is $72 for each additional unit sold.

Total cost is the sum of fixed and variable costs. Fixed costs remain constant across all output levels, and in this instance, are $100. Variable costs differ with the number of units produced.

The profit-maximizing quantity is identified where marginal revenue equals marginal cost. Beyond this point, the cost of producing an additional unit exceeds the revenue it generates, thereby reducing profit.

Diagrams of total revenue and total cost curves, alongside marginal revenue and marginal cost curves, visually represent these calculations. The intersection of the marginal revenue and marginal cost curves indicates the profit-maximizing output level.