Question

Northern Star sells several products. Information of average revenue and costs is as follows:

Selling price per unit $20.00
Variable costs per unit:
Direct material $4.00
Direct manufacturing labor $1.60
Manufacturing overhead $0.40
Selling costs $2.00 Annual fixed costs $96,000

Answer 1

The question involves calculating and analyzing total revenue, marginal revenue, total cost, and marginal cost for a perfectly competitive firm, determining the profit-maximizing output where marginal revenue equals marginal cost. Diagrams illustrating these concepts are also requested.

Step-by-step explanation:

total revenue, marginal revenue, total cost, and marginal cost:

To answer the question for Doggies Paradise Inc., we first need to create a table that calculates the total revenue, marginal revenue, total cost, and marginal cost for each unit from one to five. Marginal values are the additional cost or revenue from selling one more unit.

Once we have these values, we can determine the profit-maximizing quantity by looking for the output level where marginal revenue equals marginal cost (MR=MC). Here's the illustrative table (actual calculations should be done based on numeric data): Total Revenue (TR): This is calculated by multiplying the selling price per unit by the number of units sold. Marginal Revenue (MR): For a perfectly competitive firm, this is the same as the selling price. Total Cost (TC): This is the sum of fixed costs and total variable costs. Marginal Cost (MC): This is the increase in total cost when one additional unit is produced.