Question 18N.3.HL.TZ0.c.ii
| Date | November 2018 | Marks available | [Maximum mark: 3] | Reference code | 18N.3.HL.TZ0.c.ii |
| Level | HL | Paper | 3 | Time zone | TZ0 |
| Command term | Calculate, Identify | Question number | c.ii | Adapted from | N/A |
Firm A produces cartons of coffee. Figure 1 illustrates the firm’s total cost (TC) and variable cost (VC) at different output levels per month.
Figure 1
Figure 2 illustrates the average total cost (ATC), average variable cost (AVC) and marginal cost (MC) at different output levels for Firm B, which produces cans of tea.
The price of tea in the perfectly competitive tea market is presently $21 per can.
(ii) Using Figure 2, identify the quantity of cans per month Firm B must produce in order to maximize profits.
(iii) Calculate the economic profit when Firm B is producing at the output level identified in part (ii).
[3]
(ii) Where marginal revenue equals marginal cost.
An answer of 105 is sufficient for [1].
If the candidate identifies the quantity as 104 or 106 this should be fully rewarded.
OFR may apply.
(iii) 105 (21 − 23)
Any valid working is sufficient for [1].
= −$210 or a loss of $210
An answer of −$210 or a loss of $210 (without working) is sufficient for [1].
OFR may apply — eg −$208 if 104 cans identified in (ii) OR −$212 if 106 cans identified in (ii).
