Ask Question
BusinessBusiness
26 January, 18:36

A competitive firm currently produces and sells 500 units of output. Its total revenue is $3,500; the marginal cost of producing the 500th unit of output is $5.75; and the average total cost of producing the 500th unit of output is $4.00. Is the firm maximizing its profit, or should it increase or decrease output in order to increase its profit?

+2
Answers (1)
  1. 26 January, 19:03
    0
    Answer: Reduce output

    Explanation: Profit = Total Revenue - Total Costs

    Therefore, profit maximization occurs therefore, profit maximization occurs at the most significant gap or the biggest difference between the total revenue and the total cost.

    TC = AC*Q = $4*500 = $2,000

    Theoretically, profit maximization occurs where MR = MC

    From the forgoing, producing an extra unit will increase the cost of the company thereby reducing profit.

    The company should reduced output to around 499 units or less
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “A competitive firm currently produces and sells 500 units of output. Its total revenue is $3,500; the marginal cost of producing the 500th ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers
You Might be Interested in
Universal Containers (UC) has a desktop application to collect leads for marketing campaigns. UC wants to extend this application to integrate with Salesforce to create leads.
Answers (1)
Melanie needs to ensure that readers are able to locate specific sections within a document easily. What should she include in the document? concordance index table of contents bibliography
Answers (2)
An ad agency in atlanta, georgia, buys a quarter-page ad in a golfing magazine for a travel agency that specializes in preparing all-inclusive, hassle-free golf travel packages, on a 15 percent commission basis. the cost of the ad is $300.
Answers (1)
Early in 2017, Sheryl Crow Equipment Company sold 500 Rollomatics during 2017 at $6,000 each. During 2017, Crow spent $20,000 servicing the 2-year assurance warranties that accompany the Rollomatic. All applicable transactions are on a cash basis.
Answers (1)
Mona works for Leonardo Corporation as a sales representative. Leonardo gives her a travel allowance of $350 per month.
Answers (1)
New Questions in Business
Friendly's Quick Loans, Inc., offers you "eight for ten or I knock on your door." This means you get $8 today and repay $10 when you get your paycheck in one week (or else).
Answers (1)
Shoeleather costs arise when higher inflation rates induce people to:a. spend more time looking for bargains. b. spend less time looking for bargains. c. hold more money. d. hold less money.
Answers (1)
Lewis Inc. had the following information taken from various accounts for 2015: Sales Discounts $41,000 Unearned Revenue $32,000 Total Sales $459,000 Purchase Discounts $15,000 Sales Allowances $35,000 Accounts Receivable $205,000 What was Lewis Inc.
Answers (1)
True or False: The basic economic theory of supply and demand suggests that when price drops, consumers will buy more and thus generate stronger demand.
Answers (1)
If you think carefully about what you're doing, always ask for advice when you need it, and keep asking questions, starting a business can be
Answers (2)
Home » Business » A competitive firm currently produces and sells 500 units of output. Its total revenue is $3,500; the marginal cost of producing the 500th unit of output is $5.75; and the average total cost of producing the 500th unit of output is $4.00.
Sign Up Forgot Password?