Join Our Socials

Direction.

Directions: Answer the questions based on the following information:

ABC Ltd. Produces widgets for which the demand is unlimited and they can sell all of their production. The graph below describes the monthly variable costs incurred by the company as a function of the quantity produced. In addition, operating the plant for one shift results in a fixed monthly cost of Rs. 800. Fixed monthly costs for second shift operation are estimated at Rs. 1200. Each shift operation provides capacity for producing 30 widgets per month.

Note: Average unit cost, AC = Total monthly cost / monthly production, and Marginal cost, MC is the rate of change in total cost for unit change in quantity produced.

30

50

60

40

A. 30

We know that Profit = Price × quantity (Q) T.C = 150Q T.C

Now we will check each of the options and find out which one is giving us maximum value.

From Option (A) Q = 30, T.C = 800 + 2500 = 3300. So Profit = 1200

From Option (B) Q = 50, T.C = 2000 + 5000 = 7000. Profit = 7500 7000 = 500

From Option (C) Q = 60, Sales = 150 × 60 = 9000, TC = 2000 + 6500 = 8500. Profit = 500

From Option (D) Q = 40 Sales = 150 × 40 = 6000 TC = 2000 + 3500 = 5500 Profit = 500.

We can make out that Option (a) gives us the maximum profit