Final answer:
To calculate total revenue, multiply the selling price by the quantity sold. Marginal revenue is the change in total revenue when one additional unit is sold. Total cost is the sum of fixed costs and variable costs. Marginal cost is the change in total cost when one additional unit is produced. The profit maximizing quantity occurs where marginal revenue equals marginal cost.
Step-by-step explanation:
To calculate total revenue, we multiply the selling price by the quantity sold. In this case, the selling price is $72 and the quantity sold ranges from one to five units. For example, when one unit is sold, the total revenue is 1 * 72 = $72.
To calculate marginal revenue, we need to find the change in total revenue when one additional unit is sold. For example, when going from one unit to two units sold, the total revenue increases from $72 to $144. Therefore, the marginal revenue is 144 - 72 = $72.
To calculate total cost, we add the fixed costs to the variable costs. The fixed costs are $100 and the variable costs for each output level are given in the question. For example, when one unit is produced, the total cost is 100 + 64 = $164.
To calculate marginal cost, we need to find the change in total cost when one additional unit is produced. For example, when going from one unit to two units produced, the total cost increases from $164 to $248. Therefore, the marginal cost is 248 - 164 = $84.
Based on the given information, the table below shows the total revenue, marginal revenue, total cost, and marginal cost for each output level:
Output LevelTotal RevenueMarginal RevenueTotal CostMarginal Cost1$72$72$164$842$144$72$248$843$216$72$362$1144$288$72$546$1825$360$72$816$226
The profit maximizing quantity occurs where marginal revenue equals marginal cost. Based on the table, this occurs at output level 3, where both marginal revenue and marginal cost are $72.