Question

Below is a table showing the production quantity (Qty), marginal revenue (MR), and marginal cost (MC) for an apple orchard:

Qty (Bushels): 1
MR: $10
MC: $6

Qty (Bushels): 2
MR: $10
MC: $7

Qty (Bushels): 3
MR: $10
MC: $9

Qty (Bushels): 4
MR: $10
MC: $10

Qty (Bushels): 5
MR: $10
MC: $12

What is the profit-maximizing quantity?

-5
-4
-2
-3

Answer 1

The profit-maximizing quantity for the apple orchard is at 4 bushels, where marginal revenue (MR) equals marginal cost (MC) exactly.

Step-by-step explanation:

To determine the profit-maximizing quantity of production, we must analyze where marginal revenue (MR) equals marginal cost (MC). In this scenario with an apple orchard, we are presented with various quantities and the corresponding MR and MC. The profit-maximizing principle states that profits are maximized when MR equals MC.

Looking at the given data:

• At 1 bushel, MR ($10) > MC ($6)
• At 2 bushels, MR ($10) > MC ($7)
• At 3 bushels, MR ($10) > MC ($9)
• At 4 bushels, MR ($10) = MC ($10)
• At 5 bushels, MR ($10) < MC ($12)

Following this economic theory, we note that the profit-maximizing quantity occurs at 4 bushels, where MR equals MC exactly.