240 views

Answer the following question based on the information given below.

ABC Ltd. produces widgets for which the demand is unlimited and they can sell all of their production. The graph below describes the monthly variable costs incurred by the company as a function of the quantity produced. In addition, operating the plant for one shift results in a fixed monthly cost of Rs. $800.$ Fixed monthly costs for second shift operation are estimated at Rs. $1200.$ Each shift operation provides capacity for producing $30$ widgets per month.
Note : Average unit cost, AC $=$ Total monthly costs/monthly production, and Marginal cost, MC is the rate of change in total cost for unit change in quantity produced.

Assume that the unit price is Rs. $150$ and profit is defined as the excess of sales revenue over total costs. What is the monthly production level of ABC Ltd. at which the profit is highest?

1. $30$
2. $50$
3. $60$
4. $40$