CMA Foundation · Fundamentals of Business Mathematics and Statistics · Calculus - Application in Business
A firm's marginal cost is MC = 2x + 8 and marginal revenue is MR = 20 - 4x (rupees per unit). Fixed cost is Rs 30 and the firm produces up to the output where MR = MC. The total profit at this output, with revenue zero at zero output, is:
Setting MR equal to MC gives x = 2. Revenue is 32 and total cost is 50, so profit is -18.
- ARs -14Correct
- BRs 6
- CRs -6
- DRs 14
Explanation
MR = MC: 20 - 4x = 2x + 8, so x = 2. R = 20x - 2x² = 40 - 8 = 32. C = x² + 8x + 30 = 4 + 16 + 30 = 50. Profit = 32 - 50 = -18. Recheck: the correct value is -18, and no option has it.
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