Figure 16-8
The figure is drawn for a monopolistically-competitive firm.

-Refer to Figure 16-8.When the firm is maximizing its profit,the markup over marginal cost amounts to

Question

Figure 16-8
The figure is drawn for a monopolistically-competitive firm.
 
-Refer to Figure 16-8.When the firm is maximizing its profit,the markup over marginal cost amounts to

Quizplus · Accepted Answer

The markup over marginal cost can be calculated by finding the difference between the price and the marginal cost at the profit-maximizing quantity. From the figure, we can see that the profit-maximizing quantity is where marginal cost equals marginal revenue, which is $33.33. At this quantity, the price is $50.00. Therefore, the markup over marginal cost is $50.00 - $33.33 = $16.67.

Figure 16-8 The Figure Is Drawn for a Monopolistically-Competitive Firm