A monopoly producer of canned iced coffee produces with the following costs:
TABLE 9-3

-Refer to Table 9-3. At the profit-maximizing level of output, what is the difference between price and marginal cost?
A) $1.00
B) $1.25
C) $1.50
D) $2.00

Question

A monopoly producer of canned iced coffee produces with the following costs:
TABLE 9-3
 
-Refer to Table 9-3. At the profit-maximizing level of output, what is the difference between price and marginal cost?
A) $1.00 
B) $1.25 
C) $1.50 
D) $2.00

Quizplus · Accepted Answer

To find the profit-maximizing level of output, we need to look at the point where marginal cost equals marginal revenue. From the table, we can see that when the company produces 4 units, the price is $6.00 and the marginal cost is $4.75. The difference between price and marginal cost at this level of output is $6.00 - $4.75 = $1.25. Therefore, the answer is B.

A Monopoly Producer of Canned Iced Coffee Produces with the Following