Use the following to answer questions:
-(Table: Spring Water) The table Spring Water 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 questions: 
-(Table: Spring Water) The table Spring Water 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 monopolistic competition, the profit-maximizing price is where marginal cost (MC) equals marginal revenue (MR). Without the table, we assume the given options are potential prices where this condition is met. Typically, the price is higher than marginal cost due to the downward-sloping demand curve.

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