Question

The table below depicts the prices and total costs a local used-book store faces. The bookstore competes with a number of similar stores, but it capitalizes on its location and the word-of-mouth reputation of the coffee it serves to its customers. Calculate the store's total revenue, total profit, marginal revenue, and marginal cost at each level of output, beginning with the first unit. Based on marginal analysis, what is the approximate profit maximizing level of output for this business?

Short answer

The income margin is$3.75$and the cost profit is $3.70$respectively.

As a direct consequence, the profit-maximizing output level for the company is five units.

Step-by-step solution

Introduction. 

Marginal revenue is the additional income that ultimately resulted from buying one more unit of output. Whereas marginal revenue at a given current outcome can stay unchanged, it is subject to lower legislative changes and will eventually slowing as manufacturing level rises

Given Information.

Explanation by using Table.

For each level of output, the table below displays the complete revenue, gross revenue, marginal revenue, and marginal cost.

Output	Price per Book	Total Cost	Total Revenue	Total Profit	Marginal Revenue	Marginal Cost
$0$	$6.00$	$2.00$	$0$	$-2.00$	$-$	$-$
$1$	$5.75$	$5.25$	$5.75$	$0.50$	$5.75$	$3.25$
$2$	$5.50$	$7.50$	$11.00$	$3.50$	$5.25$	$2.25$
$3$	$5.25$	$9.60$	$15.75$	$6.15$	$4.75$	$2.10$
$4$	$5.00$	$12.10$	$20.00$	$7.90$	$4.25$	$2.50$
$5$	$4.75$	$15.80$	$23.75$	$7.95$	$3.75$	$3.70$
$6$	$4.50$	localid="1652173866579" $20.00$	$27.00$	$7.00$	$3.25$	$4.20$
$7$	$4.00$	$24.75$	$28.00$	$3.25$	$1.00$	$4.75$

In the table, total revenue corresponds the cost divided by the total number of books. Total profit = Total Revenue minus Total Cost.

Marginal Income is computed by dividing Total Income by the amount change. Total cost transformation divvied up by quantity transformation equals marginal cost.

Explanation.

• The intersection of Marginal Cost and Marginal Revenue is the profit-maximizing level of output under monopolistic competition.
• In the table, the Marginal Revenue and Marginal Cost for the fifth unit are nearly similar, i.e. the revenue margin is 3.75 and the cost margin is 3.70. As a result, the company's entire production of income is five units.