Q (kg) Fixed Cost Total Cost (TFC+TVC) Total Revenue Profit/Loss (TR - TC) MC (change in total cost/change in quantity(Q(kg)) MR (change in revenue/change in quantity 0 $3,000 $4.8

Assume the following schedule for a small supplier of lentils in a perfectly competitive industry with a prevailing wholesale market price of $4.80 per kilo and where the Total Variable Cost (TVC) is given by the following functional form:

TVC = 3Q + 0.0005Q2

Formula = TVC = 3Q + 0.0005Q2

Q (kg)

Fixed Cost

Total Cost (TFC+TVC)

Total Revenue

Profit/Loss (TR - TC)

MC (change in total cost/change in quantity(Q(kg))

MR (change in revenue/change in quantity

0

$3,000

$4.8

1,200

$3,000

4.8

2,400

$3,000

4.8

3,600

$3,000

4.80

4,800

$3,000

4.80

6,000

$3,000

4.80

7,200

$3,000

4.80

8,400

$3,000

4.80

9,600

$3,000

4.80

10,800

$3,000

4.80

12,000

$3,000

4.80

13,200

$3,000

4.80

a) Complete the schedule above (1/2 mark for each correct column x 4 = 2 marks)

b) How much (between what two optimising quantity levels) should this firm produce to maximise profit/minimise loss (1/2 mark) and how much would its profit/loss be? (1/2 mark) Explain using the concepts of MR and MC.