Question

Pinnacle Manufacturing sells satellite dishes for $275 each. The firm has fixed costs of $300,000 and variable costs per unit of $90. In order to break-even, Pinnacle must sell ________ satellite dishes.

a.1,091
b. 3,334
c. 1,622
d. 822

Answer 1

To calculate the profit-maximizing quantity, we analyze the total revenue, marginal revenue, total cost, and marginal cost. The profit-maximizing quantity is determined by identifying the level of output where the marginal cost is equal to the marginal revenue.

Step-by-step explanation:

To calculate the profit-maximizing quantity, we need to analyze the total revenue, marginal revenue, total cost, and marginal cost for each output level.

First, let's calculate the total revenue. We can find this by multiplying the price per unit by the number of units sold. For example, when one unit is sold, the total revenue is $72. Similarly, for two units, the total revenue is $144.

Next, we calculate the marginal revenue by finding the change in total revenue when one additional unit is sold. For example, the marginal revenue from selling the second unit is $72, as it is equal to the increase from $72 to $144 in total revenue.

As for the total cost, we need to sum up the fixed costs and the variable costs. For example, when one unit is produced, the total cost is $100 + $64 = $164. Similarly, for two units, the total cost is $100 + $84 = $184.

The marginal cost can be obtained by finding the change in total cost when one additional unit is produced. For example, the marginal cost from producing the second unit is $20, since it is equal to the increase from $164 to $184 in total cost.

Using this information, we can create tables to display the total revenue, marginal revenue, total cost, and marginal cost for each output level. Based on the tables and diagrams, the profit-maximizing quantity can be determined by identifying the level of output where the marginal cost is equal to the marginal revenue.