Calculate the Profit-Maximizing Price Economics to Calculate Term Paper

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Calculate the Profit-Maximizing Price

Economics

To calculate the profit-maximizing price and output level of the firm, the paper starts from price $10 to $200. The paper uses the Excel software to calculate the quantity, revenue, marginal revenue, variable costs, total costs and marginal costs. The fixed costs of the firm are $120, which does not change no matter the level of quantity produced.

However, the variable costs decline with the increase in the quantity produced. The marginal costs remain the same.

Based on the calculation in the Table 1, the profit-maximizing price is $120, which is the price the marginal revenue reaches its peak at $2,590. The increase in production at this level will make the marginal revenue to decline from $2,590 to ($2,410) as being revealed in the Table 1. As the firm increases the production, the total revenue increases, however, when the total revenue reaches $361,080, this is the point marginal revenue reaches its maximum.

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Increase in further production will make the marginal revenue to decline further. (Mankiw, 2011).

Table 1: All in U.S.$ Except Quantity

TC= FC+VC

Price ($)

Quantity

Total Revenue

Marginal Revenue

Fixed Costs

Variable Costs

Total costs

Marginal

on the MC, D and MR in the curves below in the Fig 1, the equilibrium point is where the marginal revenue cut the quantity from below. At the equilibrium point, the marginal….....

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