Final answer:
The question involves calculating revenue, costs, and the profit-maximizing quantity for Doggies Paradise Inc. Total revenue, marginal revenue, total cost, and marginal cost are calculated for output levels 1 through 5. The profit-maximizing quantity is found where marginal revenue equals marginal cost.
Step-by-step explanation:
The student's question involves revenue and cost analysis in a perfectly competitive market, specifically for a firm named Doggies Paradise Inc. selling winter coats for dogs. Here's how to perform the calculation and analysis:
- Calculate total revenue (TR) by multiplying the number of units sold by the market price. Since the market price is $72 for each dog coat, TR equals $72 times the number of units.
- Calculate marginal revenue (MR). In a perfectly competitive market, the MR is equal to the constant market price, which in this case is $72.
- Calculate total cost (TC), which is the sum of fixed costs and total variable costs for each output level. Fixed costs are $100 for all levels of output.
- Calculate marginal cost (MC) for each additional unit produced by taking the difference in total cost when one more unit is produced.
- Determine the profit maximizing quantity, which is where MR equals MC, since producing beyond this point would result in losses.
The information provided has a mistake in price, referring to both $72 and $25, which needs to be clarified. The correct calculations must be based on the accurate market price.
Note: The given text includes an example with a price of $25/unit; however, it seems to be a typographical error, as it contradicts the market price of $72/unit provided in the main information.