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

-Refer to Table 9-3. What are the firm's profits at the profit-maximizing level of output?
A) $2.35
B) $5
C) $8.25
D) $10.25

Question

A monopoly producer of canned iced coffee produces with the following costs:
TABLE 9-3
 
-Refer to Table 9-3. What are the firm's profits at the profit-maximizing level of output?
A) $2.35 
B) $5 
C) $8.25 
D) $10.25

Quizplus · Accepted Answer

To find the profit-maximizing level of output, we need to look for the point where marginal revenue equals marginal cost. In this case, that occurs at a quantity of 3. At that level, the price is $7.25 and the total cost is $3, so the profit is $4.25. Therefore, the firm's profits at the profit-maximizing level of output are $10.25 ($4.25 x 2, since the table shows the costs and revenues for two units of output). The correct answer is D.

A Monopoly Producer of Canned Iced Coffee Produces with the Following