Question

For the pizza seller whose marginal, average variable, and average total cost curves are shown in the graph below, what is the profit-maximizing level of output and how much profit will this producer earn if the price of pizza is $0. 25 per slice?.

Answer 1

The profit-maximizing level of output can be determined by finding the quantity where the marginal cost is equal to the price or marginal revenue.

Step-by-step explanation:

The profit-maximizing level of output for the pizza seller can be determined by finding the quantity where the marginal cost (MC) is equal to the price (P) or marginal revenue (MR). In the graph provided, this occurs at an output level of Q0.

To find the profit, we need to calculate the difference between the total revenue and the total cost at the profit-maximizing level of output.

Profit = Total Revenue - Total Cost