Use the following to answer question:
-Table: Spring Water.The table shows the demand and cost data for a firm in a monopolistically competitive industry producing drinking water from underground springs.The profit-maximizing price is:
A)$16.
B)$3.
C)$5.
D)$10.

Question

Use the following to answer question: 
-Table: Spring Water.The table shows the demand and cost data for a firm in a monopolistically competitive industry producing drinking water from underground springs.The profit-maximizing price is:
A)$16. 
B)$3. 
C)$5. 
D)$10.

Quizplus · Accepted Answer

In a monopolistically competitive market, firms maximize profit where marginal cost (MC) equals marginal revenue (MR). Without specific demand and cost data from the table, the general principle is to look for the price that corresponds to this equilibrium. Since the question does not provide the detailed data to directly calculate or infer MR and MC, the correct answer cannot be determined through calculation. However, given the options and the context of profit maximization in such markets, the choice that typically represents a plausible price level for a profit-maximizing firm in a competitive market could be selected. In many cases, a mid-range price might seem reasonable, but without specific data, this remains speculative. The answer provided here assumes familiarity with typical pricing strategies in monopolistically competitive markets.

Use the Following to Answer Question