Refer to the following figure:

The figure above shows the demand and cost curves facing a price-setting firm.
-At what output is marginal revenue $20?

Question

Refer to the following figure:
  
The figure above shows the demand and cost curves facing a price-setting firm.
-At what output is marginal revenue $20?

Quizplus · Accepted Answer

To find the output at which marginal revenue is $20, we need to find the point on the demand curve where the slope (or marginal revenue) equals $20. From the graph, we can see that the point where the slope of the demand curve is $20 is at an output of 200 units. Therefore, the answer is B.

As for the best choice, we need to maximize profit. This occurs where marginal revenue equals marginal cost (MR=MC). From the graph, we can see that this occurs at an output of 300 units. At this output, the firm can charge a price of $60, which is greater than both average total cost and marginal cost. Therefore, the best choice is to produce and sell 300 units.

Refer to the Following Figure