Price ($)
Quantity demanded (electric vehicle) 0 500 1,000 1,500 2,000 2,500
Quantity produced (electric vehicle) 0 500 1,000 1,500 2,000 2,500
Total Cost ($)
11,000 10,000 9,000 8,000 7,000 6,000
1,000,000 2,500,000 5,250,000 8,250,000 12,000,000 18,000,000
Table 3: Demand Schedule
Table 4: Cost Schedule
a) Construct ONE new table based on the above data. Besides including the original columns of price, quantity, and total cost, add columns of total revenue, marginal revenue, marginal cost, and average total cost for each quantity level of electric vehicle. Round your answers to INTEGERS if applicable.
Price ($) | Quantity demanded (electric vehicle) | Quantity produced (electric vehicle) | Total Cost ($) | Total Revenue ($) | Marginal Revenue ($) | Marginal Cost ($) | Average Total Cost ($)
0 | 0 | 0 | 11,000 | 0 | - | - | -
500 | 500 | 500 | 10,000 | 250,000 | 250,000 | 1,000 | 20
1,000 | 1,000 | 1,000 | 9,000 | 1,000,000 | 750,000 | 1,000 | 9
1,500 | 1,500 | 1,500 | 8,000 | 2,250,000 | 1,250,000 | 1,000 | 5
2,000 | 2,000 | 2,000 | 7,000 | 4,000,000 | 1,750,000 | 1,000 | 3.5
2,500 | 2,500 | 2,500 | 6,000 | 6,250,000 | 2,250,000 | 1,000 | 2.4
b) State the profit maximization condition. Based on your answer in part a, what is the profit-maximizing profit and output? Show your workings.
The profit maximization condition is achieved when marginal revenue equals marginal cost.
From the table in part a, the profit-maximizing output is 2,000 electric vehicles. At this quantity level, the marginal revenue is $1,750,000 and the marginal cost is $1,000.
c) Based on the given information and your answer in part b, illustrate the situation with a diagram and label the relevant data including the price, quantity, cost, and profit-loss condition in the diagram. No explanation is needed.
Title_with_topic: Profit Maximization in Electric Vehicle Production