Consider the table which shows output (o), total cost (TC)of production and marginal cost (MC) for a firm in a competitive market. Suppose price (P) = N 12, what is the maximum profit the firm can make?

  • A N2000.00
  • B 1 200.00
  • C 1000.00
  • D 400.00
jamb 1991economics

The correct answer is B. 1 200.00

The maximum profit a firm can make is calculated by subtracting the total cost (TC) from the total revenue (TR), which is the price (P) multiplied by the quantity (Q).

From the image description, the price is N12 per unit. Let’s calculate the profit for each quantity:

  • For Q=600, TR=N7200 (600*12), Profit=TR-TC=N7200-N6800=N400
  • For Q=700, TR=N8400 (700*12), Profit=TR-TC=N8400-N8700=-N300 (a loss)
  • For Q=800, TR=N9600 (800*12), Profit=TR-TC=N9600-N8400=N1200
  • For Q=900, TR=N10800 (900*12), Profit=TR-TC=N10800-N9600=N1200
  • For Q=1000, TR=N12000 (1000*12), Profit=TR-TC=N12000-N11000=N1000

The maximum profit is N1200, so the correct answer is B. 1 200.00. 

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