Exhibit 24-8 Refer to Exhibit 24-8. The maximum profits earned by a monopolistic competitive firm will be

Question

Exhibit 24-8  Refer to Exhibit 24-8. The maximum profits earned by a monopolistic competitive firm will be

Quizplus · Accepted Answer

The monopolistic competitive firm will produce where MC=MR, which is at a quantity of 80. At a quantity of 80, the firm will charge a price of $5.50 per unit. The total revenue will be 80*$5.50 = $440. 
The firm's total cost at a quantity of 80 is $90 + $50Q + $0.5Q^2 = $530. 
Therefore, the maximum profit earned by the firm is $440 - $530 = -$90. 
Since the firm cannot have negative profits, the answer is $0.