Jim Whitney Economics 102
 Profit Maximization: Worksheet 2
 
This worksheet applies marginal analysis to the firm's profit maximization situation.

Part 1 (Do this part as soon as you get the worksheet):
    1. Fill in columns 2, 3 and 7 of the following table for your price:

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
Q P TR TFC TVC TC Profit      
0     13   0 13    --- ---  --- 
1     13 9 22        
2     13 14 27        
3     13 20 33        
4     13 27 40        
5     13 37 50        
6     13 50 63        
7     13 67 80        
    2. How much output should the firm produce to maximize profits?

Part 2: (You do not have to do this part until we go over it):
    3. Label and complete columns 8 - 10 of the table above.

    4. Share results and use marginal analysis to help you determine the firm's profit-maximizing output (Q*) for each of the following possible market prices:
 
(1) (2) (3) (4) (5) (6) (7)
P Q* TR TC Profit MR MC
$13            
10            
7            
6            
 
    5. In the diagram, plot MC, and the alternative P and MR lines. Label your firm's profit- maximizing output level at each price:

    6. If you plan to remain in the costume business, should your firm operate in the short run or temporarily shut down if the price is $7? If the price is $6? Why or why not?