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Making a large profit per unit sounds great however if the firm stops production when the profit per unit peaks at $8 in column 8
Making a large profit per unit sounds great however if the firm stops production when the profit per unit peaks at $8 in column 8 it will fail to realize the additional profits namely, $7, then $3 and then $1 in column 8, that come from continuing to produce until MR=MC. The correct answer is marginal revenue equals marginal cost. A firm maximize profits where MR=MC because at this point all profitable opportunities are exhausted. If Mr. Plow clears eight driveways. His profit on the last driveway is $10 if he cleared nine driveways his profit on the additional driveway is -$15 because the marginal cost of clearing that ninth driveway $25 is greater than $10 he earns in marginal revenue. What would happen if the cost of gas, a key variable input in the production of flow services increase significantly adding an additional three dollars in cost for each driveway plowed ? What would be the profit maximizing number of driveways to plow if this happened
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