Use the figure to answer the following question(s).
Figure 9-8

If the market price in Figure 9-8 increases to $4, indicate the firm's profit-maximizing output and total revenue.
A) output, 15; total revenue, $45
B) output, 15; total revenue, $60
C) output, 17; total revenue, $68 (approx.)
D) output, 20; total revenue, $80

Question

Use the figure to answer the following question(s).
Figure 9-8

If the market price in Figure 9-8 increases to $4, indicate the firm's profit-maximizing output and total revenue.
A) output, 15; total revenue, $45 
B) output, 15; total revenue, $60 
C) output, 17; total revenue, $68 (approx.) 
D) output, 20; total revenue, $80

Quizplus · Accepted Answer

At a market price of $4, the firm's profit-maximizing output is where marginal revenue (MR) equals marginal cost (MC), which is at an output level of 17. At this output level, the total revenue is approximately $68. Choice A and B are incorrect because they assume a linear demand curve, which is not the case in the given figure. Choice D is incorrect because it assumes that the firm can sell 25 units at a price of $4, which is not supported by the demand curve in the given figure.

Use the Figure to Answer the Following Question(s)