Based on marginal analysis, what is the profit-maximizing rate of output for the pizza shop? 9 pizzas.
In order to get the number of pizza that has to be produced, we have to check the table.
This firm has to continue in its production until it is able to increase its output by one extra unit.
This would be the point where the cost of production is the same as the revenue that would be gotten from the extra unit.
The point of interest that we have to focus on is the point where marginal revenue is equal to marginal cost.
MR = MC
The table below represents the hourly output and cost structure for a local pizza shop. The market is perfectly competitive, and the market price of a pizza in the area is
$12.
Total costs include all implicit opportunity costs. Calculate the pizza shop's marginal cost and marginal revenue at each rate of output and fill in the values in the table.
(Marginal revenue is the change in revenue divided by the change in output. For a perfectly competitive firm the marginal revenue is equal to the price. Marginal cost is the change in cost divided by the change in output.)
Based on marginal analysis, what is the profit-maximizing rate of output for the pizza shop? _______ pizzas.
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