Question

The table shown below gives the short-run total cost function Noel’s window cleaning firm. This firm competes in a perfectly competitive market.
Number Of Jobs Completed Total Costs in $$
0 30
1 37
2 48
3 65
4 92
5 129
6 169

Noel’s firm charges the market price for window washing jobs, $30/job. At what output will the firm maximize profit? What will that profit be?

Answer 1

Answer:

profit maximizing output is 4; $28

Explanation:

Noel’s firm charges the market price for window washing jobs = $30/job

Marginal cost for the 5th unit of output:  

= Total cost from 5th unit - Total cost from 4th unit

= $129 - $92

= $37

At 5th level of output, the marginal cost is greater than the market price for window washing jobs.

Therefore, the profit maximizing output is 4.

Profit = (market price × output) - Total cost

        = ($30 × 4) - 92

        = $120 - $92

        = $28