Eliza's Doggie Delights is a producer of dog treats. The marginal cost of producing each dog treat is given in the table below. Assume that only whole dog treats can be produced and sold.
\begin{tabular}{llll}
Price & Q (treats) & Marginal cost (MC) & Marginal Revenue (MR) \
\hline$\$ 5$ & 0 & - & - \
$\$ 5$ & 1 & $\$ 3$ & $\$ 5$ \
$\$ 5$ & 2 & $\$ 1$ & $\$ 5$ \
$\$ 5$ & 3 & $\$ 4$ & $\$ 5$ \
$\$ 5$ & 4 & $\$ 6$ & $\$ 5$ \
$\$ 5$ & 5 & $\$ 9$ & $\$ 5$ \
$\$ 5$ & 6 & $\$ 12$ & $\$ 5$
\end{tabular}

If Eliza's Doggie Delights wants to maximize profits, how many dog treats should it produce?

Choose 1 answer:
(A) 2
(B) 4

Question

Eliza's Doggie Delights is a producer of dog treats. The marginal cost of producing each dog treat is given in the table below. Assume that only whole dog treats can be produced and sold.
\begin{tabular}{llll} 
Price & Q (treats) & Marginal cost (MC) & Marginal Revenue (MR) \
\hline$\$ 5$ & 0 & - & - \
$\$ 5$ & 1 & $\$ 3$ & $\$ 5$ \
$\$ 5$ & 2 & $\$ 1$ & $\$ 5$ \
$\$ 5$ & 3 & $\$ 4$ & $\$ 5$ \
$\$ 5$ & 4 & $\$ 6$ & $\$ 5$ \
$\$ 5$ & 5 & $\$ 9$ & $\$ 5$ \
$\$ 5$ & 6 & $\$ 12$ & $\$ 5$
\end{tabular}

If Eliza's Doggie Delights wants to maximize profits, how many dog treats should it produce?

Choose 1 answer:
(A) 2
(B) 4

Accepted Answer

∻Solution∻ ‖ a ⋮ Profit Maximization Rule: A firm maximizes profit by producing the quantity of output where marginal revenue (MR) equals marginal cost (MC), provided that MR ≥ MC for all previous units. ‖ ‖ b ⋮ Analysis of Table: By examining the table, we can determine the quantity of dog treats to produce by finding where MR equals MC and ensuring that MR is greater than or equal to MC for all previous quantities. ‖ ‖ c ⋮ Calculation: - At Q = 1, MR = $5 and MC = $3 (MR > MC) - At Q = 2, MR = $5 and MC = $1 (MR > MC) - At Q = 3, MR = $5 and MC = $4 (MR > MC) - At Q = 4, MR = $5 and MC = $6 (MR < MC) Thus, the profit is maximized at Q = 3, where MR = MC and MR ≥ MC for all previous units. ‖ ∻Answer∻ ⚹ 3 ⚹ ∻Key Concept∻ ⚹ Profit Maximization ⚹ ∻Explanation∻ ⚹ Eliza's Doggie Delights should produce 3 dog treats to maximize profits, as this is the quantity where marginal revenue equals marginal cost and is not exceeded by marginal cost for any lower quantity.◊What is the formula for calculating profit in Microeconomics?⍭ Generate me a similar question◊⚹

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