Figure 16-1. The figure is drawn for a monopolistically competitive firm.

-Refer to Figure 16-1.Suppose that average total cost is $18 when Q=12.What is the profit-maximizing price and resulting profit?

Question

Figure 16-1. The figure is drawn for a monopolistically competitive firm.
 
-Refer to Figure 16-1.Suppose that average total cost is $18 when Q=12.What is the profit-maximizing price and resulting profit?

Quizplus · Accepted Answer

The profit-maximizing price is where marginal cost equals marginal revenue. If average total cost is $18 at Q=12, and the price is also $18, then profit is zero because total revenue equals total cost.