The data below are for a competitive business (price-taker).If the market price is $800 per unit,the company should $\begin{array}{rrrrr}
&\text { Average } & \text { Average } & \text { Average }\
\text { Output}& \text {Fixed Costs}& \text {Variable Costs}& \text {Total Costs} &\text {Marginal Cost }\
\hline
0&\$ 3,000\
1 & \$ 3,000 & \$ 900 & \$ 3,900 & \$ 900 \
2 & \$ 1,500 & \$ 800 & \$ 2,300 & \$ 700 \
3 & \$ 1,000 & \$ 700 & \$ 1,700 & \$ 500 \
4 & \$ 750 & \$ 600 & \$ 1,350 & \$ 300 \
5 & \$ 600 & \$ 500 & \$ 1,100 & \$ 100 \
6 & \$ 500 & \$ 550 & \$ 1,050 & \$ 800 \
7 & \$ 429 & \$ 600 & \$ 1,029 & \$ 900 \
8 & \$ 375 & \$ 650 & \$ 1,025 & \$ 1,000 \
9 & \$ 333 & \$ 700 & \$ 1,033 & \$ 1,100 \
10 & \$ 300 & \$ 750 & \$ 1,050 & \$ 1,200
\end{array}$

Question

Quizplus · Accepted Answer

To determine the best choice, we need to calculate the profit for each output level at the given market price of $800. Profit can be calculated using the formula:

Profit = Total Revenue - Total Cost

We know that Total Revenue = Price x Quantity, where Price = $800.

Now, let's calculate the Total Costs and profit for each output level:

- Output 0: Total Cost = $3,000, Total Revenue = $0, Profit = -$3,000 
- Output 1: Total Cost = $3,900, Total Revenue = $800, Profit = -$3,100 
- Output 2: Total Cost = $2,300, Total Revenue = $1,600, Profit = $300 
- Output 3: Total Cost = $1,700, Total Revenue = $2,400, Profit = $700 
- Output 4: Total Cost = $1,350, Total Revenue = $3,200, Profit = $1,850 
- Output 5: Total Cost = $1,100, Total Revenue = $4,000, Profit = $2,900 
- Output 6: Total Cost = $1,050, Total Revenue = $4,800, Profit = $3,750 
- Output 7: Total Cost = $1,029, Total Revenue = $5,600, Profit = $4,571 
- Output 8: Total Cost = $1,025, Total Revenue = $6,400, Profit = $5,375 
- Output 9: Total Cost = $1,033, Total Revenue = $7,200, Profit = $6,167 
- Output 10: Total Cost = $1,050, Total Revenue = $8,000, Profit = $6,950

Based on the above calculations, producing 6 units will maximize profit, with a profit of $3,750. Therefore, the best choice is to produce six units.

The Data Below Are for a Competitive Business (Price-Taker) A)shut Down (Produce Nothing)