Using the data developed in Problems 2-2 and2-3.
a. plot the total, average, and marginal functions for both revenue and cost. [Note: Use a two-part graph similar to Figure 2.1 that places the total function in the upper part and the average and marginal functions in the lower half. Also, it is conventional to plot the marginal values at the midpoint between the quantity values to which they relate. For example, the marginal revenue associated with going from two units of output to three units is $150. This value should be plotted midway between the two- and three-unit marks on the quantity (i.e.. horizontal) axis.]
b. What is true of the marginal revenue function at that level of output where total revenue is at a maximum?
c. Determine total profit by subtracting total cost from total revenue at each rate of output. Plot this function in the upper part of your diagram.
d. By comparing the marginal revenue and marginal cost curves and relating them to the profit curve, can you think of a rule the firm might use to determine the output rate that would maximize profit?