Multiple choice

Directions: Study the data given below and answer the following question. The table provides cost and price information for a firm called Comfy Cushions (CC). The firm produces and sells cushions using a fixed amount of capital equipment but can change the level of inputs such as labour and materials. | Production (Q) | Price per unit (P) | Total cost (TC) | Average total cost (ATC) | Marginal cost (MC) | Total revenue (TR) | Marginal Revenue per unit (MR) | | --- | --- | --- | --- | --- | --- | --- | | 0 | 250 | 500 | | | | | | 1 | 240 | 730 | | | | | | 2 | 230 | 870 | | | | | | 3 | 220 | 950 | | | | | | 4 | 210 | 1010 | | | | | | 5 | 200 | 1090 | | | | | | 6 | 190 | 1230 | | | | | | 7 | 180 | 1470 | | | | | | 8 | 170 | 1850 | | | | | | 9 | 160 | 2410 | | | | | Calculate CC's maximum profit or minimum loss.

  1. Loss of Rs. 100

  2. Loss of Rs. 60

  3. Profit of Rs. 90

  4. Loss of Rs. 90

Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Profit = Total Revenue - Total Cost. TR = P * Q. At Q=4, TR=840, TC=1010, Loss=170. At Q=5, TR=1000, TC=1090, Loss=90. At Q=6, TR=1140, TC=1230, Loss=90. The minimum loss is 90.