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2 November, 14:06

1. A firm in a competitive market has the following cost structure: Output Total Costs 0 $10 1 $12 2 $15 3 $19 4 $24 5 $30 6 $37 7 $46 8 $55 9 $65 If the market price is $8, how many units should the firm produce to maximize profit? a. 5 units b. 6 units c. 7 units d. 8 units

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  1. 2 November, 14:21
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    b. 6 units

    Explanation:

    Output Revenue Costs = Profit (Revenue - Costs)

    0 0 10 = - 10

    1 8 12 = - 4

    2 16 15 = 1

    3 24 19 = 5

    4 32 24 = 8

    5 40 30 = 10

    6 48 37 = 11

    7 56 46 = 10

    8 64 55 = 9

    9 72 65 = 7

    Note: The revenue is calculated by multiplying output by the market price of $8.

    The firm should produce 6 units to maximize their profit which is $11.
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