Suppose that you have returned from your fishing expedition with 20000 fish. The market price I'd R3 per fish. Your average fixed cost was R1 and your total variable cost was R5000. If the price jumps to R3.50 before you sell your fish how much extra profit do you earn

Answer 1

First, let's calculate the total revenue at the original price of R3 per fish:
Total revenue = number of fish x price per fish
Total revenue = 20000 x R3
Total revenue = R60000

Next, let's calculate the total cost:
Total cost = total fixed cost + total variable cost
Total cost = R1 + R5000
Total cost = R5001

Now, let's calculate the profit at the original price:
Profit = total revenue - total cost
Profit = R60000 - R5001
Profit = R54999

If the price jumps to R3.50 per fish, the new total revenue would be:
Total revenue = 20000 x R3.50
Total revenue = R70000

The new profit would be:
New profit = total revenue - total cost
New profit = R70000 - R5001
New profit = R64999

Therefore, the extra profit earned by the price jumping to R3.50 per fish is:
Extra profit = new profit - original profit
Extra profit = R64999 - R54999
Extra profit = R10000

You earn an extra profit of R10000.