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A price-taking firm makes air conditioners. The market price of one of their newair conditioners is $120. Its total cost information is given in the table below:

Air conditioners per day
Total cost ($ per day)

1
100

2
150

3
220

4
310

5
405

6
510

7
650

8
800

How many air conditioners should the firm produce per day if its goal is tomaximize its profit?
There are two methods to solved this problem:- The cost benefit principle, A firm should keep producing and creating goods in additional units to get extra benefits or can say additional benefit in the business. This additional benefit is to produce the goods is at least as extra cost to produce the same good. That is, MB > MC As given the market price of one air conditioner is $120, in perfectly competitive firm will sell more and more air conditioners to maximize their profit. So The MB from selling an extra air conditioner is $120. So calculate the MC is =s Air conditioners/day Total Cost ($/day) MC ($/day) 1 100 100 2 150 50 3 220 70 4 310 90 5 405 95 6 510 105 7 650 140 8 800 150 As per the table we can comparing the MB ($120) and the MC so if the firm will produce 6 air conditioners per day so it will get optimal output for…

s. The MC of each of the first 6 air conditioners produced each day is $105, which is less than the MB of $120. MB ($120) > MC ($105) Calculate the profit: Profit = TR TC Air conditioners/day Total Cost ($/day) Total Revenue ($/day) Profit ($/day) 1 100 120 20 2 150 240 90 3 220 360 140 4 310 480 170 5 405 600 195 6 510 720 210 7 650 840 190 8 800 960 160 Profit = TR TC. Profit = $720 $510 = $210. For the maximize the profit this firm should produce 6 air conditioner per day, because it yield the highest profit among the others, $210/day.

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