Table 16-6
Traci's Hairstyling is one salon among many in the market for hairstyling. The following table presents cost and revenue data for haircuts at Traci's Hairstyling.

-Refer to Table 16-6.If the government forced Traci's to produce at the efficient scale of output,what is the maximum profit Traci's could earn?

Question

Table 16-6
Traci's Hairstyling is one salon among many in the market for hairstyling. The following table presents cost and revenue data for haircuts at Traci's Hairstyling.
 
-Refer to Table 16-6.If the government forced Traci's to produce at the efficient scale of output,what is the maximum profit Traci's could earn?

Quizplus · Accepted Answer

To find the efficient scale of output, we need to look for the point where Marginal Cost equals Marginal Revenue. In this case, the efficient scale of output is 7 haircuts. At 7 haircuts, the Marginal Cost is $10 and the Marginal Revenue is $14, resulting in a profit of $4 per haircut. Therefore, the maximum profit Traci's could earn at the efficient scale of output is $4 x 21 haircuts = $84.

Table 16-6 Traci's Hairstyling Is One Salon Among Many in the Market