To find the profit-maximizing level of output and the firm's total revenue, we need to use the data provided in the table and compare the marginal revenue (MR), marginal cost (MC), and the minimum average variable cost (AVC). Here are the steps:
1. Extract the relevant data from the table:
- Output levels: 1, 2, 3, 4, 5
- Marginal revenue (MR): \[tex]$16 for each output level
- Marginal costs (MC): \$[/tex]13, \[tex]$8, \$[/tex]10, \[tex]$15, \$[/tex]22 for respective output levels
- Minimum average variable cost (AVC): \[tex]$12
2. Identify the profit-maximizing output level:
- At the profit-maximizing level of output, MR must be greater than or equal to MC, and MC must be greater than or equal to the minimum AVC point.
3. Compare these conditions for each output level:
- Output Level 1:
- MC = \$[/tex]13
- MR = \[tex]$16 (MR >= MC, which is true)
- MC >= AVC (\$[/tex]13 >= \[tex]$12, which is true)
- Hence, Output Level 1 satisfies the conditions.
- Output Level 2:
- MC = \$[/tex]8
- MR = \[tex]$16 (MR >= MC, which is true)
- MC >= AVC (\$[/tex]8 < \[tex]$12, which is false)
- Hence, Output Level 2 does not satisfy the conditions.
Since MC < AVC here, output level 2 and above should not be considered further as the profit conditions cannot be met.
Therefore, the profit-maximizing output level is 1.
4. Calculate the total revenue at the profit-maximizing output level:
- Total revenue (TR) = Output level * Marginal Revenue
- TR = 1 * \$[/tex]16 = \[tex]$16
Hence, at the profit-maximizing level of output, the firm's total revenue is \$[/tex]16.
