Use the table of expected cost and revenue data for the Tuckers Tomato Farm below to answer the following question(s). The Tuckers produce tomatoes in a greenhouse and sell them wholesale in a competitive price-taker market.
Table 9-1
Refer to Table 9-1. If the Tuckers are profit maximizers, how many tomatoes should they produce when the market price is $500 per ton?
A) 6
B) 7
C) 8
D) 9

Question

Use the table of expected cost and revenue data for the Tuckers Tomato Farm below to answer the following question(s). The Tuckers produce tomatoes in a greenhouse and sell them wholesale in a competitive price-taker market.
Table 9-1
 Refer to Table 9-1. If the Tuckers are profit maximizers, how many tomatoes should they produce when the market price is $500 per ton?
A) 6 
B) 7 
C) 8 
D) 9

Quizplus · Accepted Answer

To maximize profit, the Tuckers should produce the quantity where marginal revenue (MR) equals marginal cost (MC). When the market price is $500 per ton, the MR can be found in the table by calculating the change in total revenue (TR) for each additional unit produced. For example, when producing 5 tons, TR is $2,500. Increasing production to 6 tons raises TR to $3,000, so MR for the 6th ton is $500. Continue this process to find that MR for the 7th ton is also $500. MC can be found similarly by calculating the change in total cost (TC) for each additional unit produced. For example, when producing 5 tons, TC is $1,600. Increasing production to 6 tons raises TC to $1,900, so MC for the 6th ton is $300. Continuing this process to find that MC for the 7th ton is $500. Since MR = MC for the 7th ton, the Tuckers should produce 7 tons to maximize profit when the market price is $500 per ton.

Use the Table of Expected Cost and Revenue Data for the Tuckers