4. Consider total cost and total revenue given in
the following table:
Quantity 0 1 2 3 4 5 6 7
Total cost $8 9 10 11 13 19 27 37
Total revenue $0 8 16 24 32 40 48 56
a. Calculate profit for each quantity. How much
should the firm produce to maximize profit?
b. Calculate marginal revenue and marginal
cost for each quantity. Graph them. (Hint:
Put the points between whole numbers. For
example, the marginal cost between 2 and 3
should be graphed at 21/2.) At what quantity
do these curves cross? How does this relate
to your answer to part (a)?
c. Can you tell whether this firm is in a
competitive industry? If so, can you tell
whether the industry is in a long-run
equilibrium?
