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Question
Microeconomics
Posted 2 months ago

The Frank-Heggood Consulting Company charges clients $100\$ 100 per hour. The maximum number of hours of consulting It can provide each day is 12 hours. The marginal cost of each hour of consulting is given in the table below.
\begin{tabular}{llll} 
Price & QQ (hours) & Marginal cost (MC)(M C) & Marginal Revenue (MR)(M R) \\
\hline$100\$ 100 & 1 & $40\$ 40 & $100\$ 100 \\
$100\$ 100 & 2 & $30\$ 30 & $100\$ 100 \\
$100\$ 100 & 3 & $20\$ 20 & $100\$ 100 \\
$100\$ 100 & 4 & $30\$ 30 & $100\$ 100 \\
$100\$ 100 & 5 & $40\$ 40 & $100\$ 100 \\
$100\$ 100 & 6 & $50\$ 50 & $100\$ 100 \\
$100\$ 100 & 7 & $60\$ 60 & $100\$ 100 \\
$100\$ 100 & 8 & $70\$ 70 & $100\$ 100 \\
$100\$ 100 & 9 & $80\$ 80 & $100\$ 100 \\
$100\$ 100 & 10 & $90\$ 90 & $100\$ 100 \\
$100\$ 100 & 11 & $100\$ 100 & $100\$ 100 \\
$100\$ 100 & 12 & $110\$ 110 & $100\$ 100
\end{tabular}

If the Frank-Heggood Consulting Company wants to maximize profits, how many hours of consulting should it provide each day?

Choose 1 answer:
(A) 9
(B) 11
(C) 12
(D) 10
(E) 8
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Answer from Sia
Posted 2 months ago
Solution
a
Profit Maximization Condition: To maximize profits, the firm should produce where Marginal Revenue (MR) equals Marginal Cost (MC)
b
Given Data: The table provides the Marginal Cost (MC) and Marginal Revenue (MR) for different quantities of hours
c
Analysis: We need to find the quantity where MR=MCMR = MC. From the table: - At 1 hour: MC=40MC = 40, MR=100MR = 100 - At 2 hours: MC=30MC = 30, MR=100MR = 100 - At 3 hours: MC=20MC = 20, MR=100MR = 100 - At 4 hours: MC=30MC = 30, MR=100MR = 100 - At 5 hours: MC=40MC = 40, MR=100MR = 100 - At 6 hours: MC=50MC = 50, MR=100MR = 100 - At 7 hours: MC=60MC = 60, MR=100MR = 100 - At 8 hours: MC=70MC = 70, MR=100MR = 100 - At 9 hours: MC=80MC = 80, MR=100MR = 100 - At 10 hours: MC=90MC = 90, MR=100MR = 100 - At 11 hours: MC=100MC = 100, MR=100MR = 100 - At 12 hours: MC=110MC = 110, MR=100MR = 100 The quantity where MR=MCMR = MC is at 11 hours
Answer
(B) 11
Key Concept
Profit Maximization
Explanation
The firm maximizes profit by producing the quantity where Marginal Revenue equals Marginal Cost. In this case, it is at 11 hours.

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