Final answer:
Doggies Paradise Inc. must calculate total revenue, total cost, marginal revenue, and marginal cost to find the profit maximizing quantity. The profit maximizing point is where marginal cost equals marginal revenue, which is production of three units in this scenario.
Step-by-step explanation:
Profit Maximizing Quantity for Doggies Paradise Inc.
The firm Doggies Paradise Inc. operates in a perfectly competitive market and produces winter coats for dogs. To determine the profit maximizing quantity, we need to analyze the data provided and perform some calculations.
Units SoldTotal RevenueMarginal RevenueTotal CostMarginal Cost1$72$72$164 ($100 fixed + $64 variable)$642$144$72$184 ($100 fixed + $84 variable)$203$216$72$214 ($100 fixed + $114 variable)$304$288$72$284 ($100 fixed + $184 variable)$705$360$72$370 ($100 fixed + $270 variable)$86
The diagrams for total revenue and total cost curves, as well as marginal revenue and marginal cost curves, would reflect the data in this table, showing the intersection points. To find the profit maximizing quantity, we look for where marginal revenue equals marginal cost, which, according to the table, is at the production of three units. This is where producing one more unit does not add to the total profit, and the costs of production do not exceed revenue.