Use the following to answer question:
Figure: Demand and Marginal Revenue
-(Figure: Demand and Marginal Revenue)Use Figure: Demand and Marginal Revenue.The figure refers to a software upgrade.The producer incurred fixed costs of $10 million to produce the upgrade;the marginal cost of allowing consumers to download the upgrade is zero.What is the efficient level of output for the upgrade?
A)0
B)80,000
C)125,000
D)250,000

Question

Use the following to answer question:
Figure: Demand and Marginal Revenue 
-(Figure: Demand and Marginal Revenue)Use Figure: Demand and Marginal Revenue.The figure refers to a software upgrade.The producer incurred fixed costs of $10 million to produce the upgrade;the marginal cost of allowing consumers to download the upgrade is zero.What is the efficient level of output for the upgrade?
A)0 
B)80,000 
C)125,000 
D)250,000

Quizplus · Accepted Answer

The efficient level of output occurs where marginal cost equals marginal revenue. Since the marginal cost is zero, the efficient output is where marginal revenue is also zero, which is at 250,000 units.

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