Table 11-2
-In Table 11-2, the price at the profit-maximizing output is how much?
A)$15
B)$7
C)$10
D)$11

Question

Table 11-2  ​
-In Table 11-2, the price at the profit-maximizing output is how much?
A)$15 
B)$7 
C)$10 
D)$11

Quizplus · Accepted Answer

To find the profit-maximizing output, we need to find the point where Marginal Cost (MC) equals Marginal Revenue (MR). Looking at the table, we can see that the MC is $4 for all 4 output levels. The MR is the change in total revenue divided by the change in output, so we can calculate it for each additional unit produced:

MR(1) = ($20 - $10) / (2 - 1) = $10
MR(2) = ($30 - $20) / (3 - 2) = $10
MR(3) = ($36 - $30) / (4 - 3) = $6

So, we can see that MC = MR at a production level of 2 (where both are $4), but the highest profit is earned at an output level of 3, where the price is $12 and the total cost is $9, yielding a profit of $3 per unit. Therefore, the price at the profit-maximizing output is $12. However, this answer is not listed as a choice, so we need to choose the closest one, which is D, $11.

Table 11-2 ​

Table 11-2