Question

"A) What size license fee would implement the economically optimal

outcome? Show all work.
B) What is the economically optimal number of fishing trips?
Show your work and explain.
Fishing Trips (Q) Total Catch (Tons) Total Revenue $ Total Cost $ Marginal Revenue $ Marginal Cost $ 1 & 20 & 20000 & 12500 & 20,000 & 12500 "

Answer 1

To calculate the total revenue, multiply the price by the quantity. The profit-maximizing quantity of output is where marginal revenue equals marginal cost. In this case, it is at 3 units.

Step-by-step explanation:

To calculate the total revenue, simply multiply the price by the quantity. The marginal revenue is the change in total revenue when one more unit is sold. To calculate total cost, add the fixed cost to the variable cost. The marginal cost is the change in total cost when one more unit is produced.

For each output level:

• 1 unit: Total Revenue = $20, Marginal Revenue = $20, Total Cost = $40, Marginal Cost = $20
• 2 units: Total Revenue = $40, Marginal Revenue = $20, Total Cost = $65, Marginal Cost = $25
• 3 units: Total Revenue = $60, Marginal Revenue = $20, Total Cost = $100, Marginal Cost = $35
• 4 units: Total Revenue = $80, Marginal Revenue = $20, Total Cost = $150, Marginal Cost = $50
• 5 units: Total Revenue = $100, Marginal Revenue = $20, Total Cost = $200, Marginal Cost = $80

The profit-maximizing quantity of output is where marginal revenue equals marginal cost. In this case, it is at 3 units.