Final answer:
The AAA Aquarium Co. wants to calculate total revenue, marginal revenue, total cost, and marginal cost for each output level. They also want to know the profit-maximizing quantity of output and how to sketch the total revenue and total cost curves, as well as the marginal revenue and marginal cost curves on diagrams.
Step-by-step explanation:
The AAA Aquarium Co. – Total Revenue, Marginal Revenue, Total Cost, and Marginal Cost
Using the information provided, we can calculate the total revenue, marginal revenue, total cost, and marginal cost for each output level (one to five units).
Total Revenue: This is the product of the selling price and the quantity sold. For example, for one unit, the total revenue would be ($20 x 1) = $20.
Marginal Revenue: This is the change in total revenue when one additional unit is sold. For example, for two units, the marginal revenue would be ($20 - $20) = $0, since the total revenue remains the same.
Total Cost: This is the sum of the fixed cost and the variable costs for each output level. For example, for one unit, the total cost would be ($20 + $20) = $40.
On a diagram, the total revenue and total cost curves would be plotted against the quantity of output. The intersection of these curves represents the profit-maximizing quantity of output.
The marginal revenue and marginal cost curves would be plotted separately on another diagram. The profit-maximizing quantity of output would be where the marginal revenue curve intersects the marginal cost curve, as this represents the point where the additional revenue from one more unit sold equals the additional cost of producing one more unit.