Final answer:
To calculate total revenue, multiply the number of units sold by the price per unit. Marginal revenue is calculated by subtracting the total revenue for the previous level of output from the total revenue for the current level of output. Total cost is calculated by adding the fixed cost to the variable cost for the given level of output. Marginal cost is calculated by subtracting the total cost for the previous level of output from the total cost for the current level of output. The profit maximizing quantity is the level of output where marginal revenue equals marginal cost.
Step-by-step explanation:
To calculate total revenue, multiply the number of units sold by the price per unit. For example, if 5 units are sold at $72 each, the total revenue would be $360. To calculate marginal revenue, subtract the total revenue for the previous level of output from the total revenue for the current level of output. For example, if total revenue for 4 units is $288 and total revenue for 5 units is $360, the marginal revenue for the 5th unit would be $72. To calculate total cost, add the fixed cost to the variable cost for the given level of output. For example, if the fixed cost is $100 and the variable cost for 5 units is $270, the total cost would be $370. To calculate marginal cost, subtract the total cost for the previous level of output from the total cost for the current level of output. For example, if total cost for 4 units is $186 and total cost for 5 units is $370, the marginal cost for the 5th unit would be $184. The profit maximizing quantity can be determined by finding the level of output where marginal revenue equals marginal cost. In this case, it would be the quantity where the marginal revenue is $72 and the marginal cost is $184.