Final answer:
To find the profit-maximizing quantity for Doggies Paradise Inc., calculate total revenue, total cost, and marginal cost for each output level, then graph these to determine where marginal cost equals marginal revenue.
Step-by-step explanation:
The profit-maximizing quantity for Doggies Paradise Inc., which sells winter coats for dogs, can be determined by calculating the total revenue and total cost at each level of output and then comparing these to find the quantity where profit is maximized. The total revenue for each unit is found by multiplying the number of units sold by the price per unit ($72). Marginal revenue is the additional revenue gained from selling one more unit and is constant at $72 in a perfectly competitive market. Total costs include both fixed costs and variable costs at each output level. Marginal cost is the additional cost incurred from producing one more unit, calculated by taking the change in total cost when one additional unit is produced. A table can be created with columns for units produced, total revenue, total cost, and marginal cost, and rows for each level of output from one to five units. Then, graphs can be created to visually find the profit-maximizing quantity where marginal cost equals marginal revenue. The profit maximizing quantity is where the marginal cost curve intersects the marginal revenue curve on the graph.