. Fill in this chart and explain why the firm earns a profit no matter how many units they produce or the price they choose. 2. Using this data, how many units should this firm produce and what price should they charge assuming they want to profit maximize.

. Fill in this chart and explain why the firm earns a profit no matter how many units they produce or the price they choose. 2. Using this data, how many units should this firm produce and what price should they charge assuming they want to profit maximize.

Economics Today and Tomorrow, Student Edition

1st Edition

ISBN:9780078747663

Author:McGraw-Hill

Publisher:McGraw-Hill

Chapter5: Buying The Necessities

Section: Chapter Questions

Problem 20AA

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Concept explainers

Productive and Allocative Efficiency Analysis

Productive efficiency, also referred to as production efficiency is a term in economics describing the level at which a company is operating at its maximum capacity. Beyond this point, the entity will be unable to manufacture any additional goods without cutting down another product’s production level. This occurrence is an outcome of production happening alongside a Production Possibility Frontier (PPF).

Question

1. Fill in this chart and explain why the firm earns
a profit no matter how many units they produce or the price they choose.

2. Using this data, how many units should this firm produce and what price should they charge
assuming they want to profit maximize.

Quantity Price
1
2
3
4
5
6
78
$50
$40
$35
$32
$28
$24
$21
$18
TR
MR
XX
TC
$34
$40
$48
$58
$70
$84
$102
$128
MC
XX

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Step 1: Profit Maximization

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Step 2: Total revenue greater than the total cost

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Step 3: Profit maximizing - Quantity and Price

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