Question

Microeconomics

Posted 6 months ago

```
The Frank-Heggood Consulting Company charges clients $\$ 100$ 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 & $Q$ (hours) & Marginal cost $(M C)$ & Marginal Revenue $(M R)$ \\
\hline$\$ 100$ & 1 & $\$ 40$ & $\$ 100$ \\
$\$ 100$ & 2 & $\$ 30$ & $\$ 100$ \\
$\$ 100$ & 3 & $\$ 20$ & $\$ 100$ \\
$\$ 100$ & 4 & $\$ 30$ & $\$ 100$ \\
$\$ 100$ & 5 & $\$ 40$ & $\$ 100$ \\
$\$ 100$ & 6 & $\$ 50$ & $\$ 100$ \\
$\$ 100$ & 7 & $\$ 60$ & $\$ 100$ \\
$\$ 100$ & 8 & $\$ 70$ & $\$ 100$ \\
$\$ 100$ & 9 & $\$ 80$ & $\$ 100$ \\
$\$ 100$ & 10 & $\$ 90$ & $\$ 100$ \\
$\$ 100$ & 11 & $\$ 100$ & $\$ 100$ \\
$\$ 100$ & 12 & $\$ 110$ & $\$ 100$
\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
Report a problen
```

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Answer from Sia

Posted 6 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 $MR = MC$. From the table:
- At 1 hour: $MC = 40$, $MR = 100$
- At 2 hours: $MC = 30$, $MR = 100$
- At 3 hours: $MC = 20$, $MR = 100$
- At 4 hours: $MC = 30$, $MR = 100$
- At 5 hours: $MC = 40$, $MR = 100$
- At 6 hours: $MC = 50$, $MR = 100$
- At 7 hours: $MC = 60$, $MR = 100$
- At 8 hours: $MC = 70$, $MR = 100$
- At 9 hours: $MC = 80$, $MR = 100$
- At 10 hours: $MC = 90$, $MR = 100$
- At 11 hours: $MC = 100$, $MR = 100$
- At 12 hours: $MC = 110$, $MR = 100$
The quantity where $MR = MC$ 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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