(Table: Prices and Demand for New York Rangers Signature Jerseys) Use Table: Prices and Demand for New York Rangers Signature Jerseys. The New York Rangers have a monopoly on Rangers jerseys. The Rangers sell at most 1 jersey to each customer, and the table shows each customer's willingness to pay. The marginal cost of producing a jersey is $18, and there are no fixed costs. How much is the Rangers' profit at the profit-maximizing output?
A)$800.
B)$200.
C)$600.
D)$1,000.

Question

(Table: Prices and Demand for New York Rangers Signature Jerseys) Use Table: Prices and Demand for New York Rangers Signature Jerseys. The New York Rangers have a monopoly on Rangers jerseys. The Rangers sell at most 1 jersey to each customer, and the table shows each customer's willingness to pay. The marginal cost of producing a jersey is $18, and there are no fixed costs. How much is the Rangers' profit at the profit-maximizing output? 
A)$800. 
B)$200. 
C)$600. 
D)$1,000.

Quizplus · Accepted Answer

To find the profit-maximizing output, we need to compare the marginal revenue (MR) and marginal cost (MC). Looking at the table, we can see that the Rangers can sell jerseys to a maximum of 7 customers. The marginal revenue for each additional customer is the same as the price, so we can add a column for MR.

| Customer | Willingness to Pay | Price | MR (Price) | 
|----------|--------------------|-------|-----------|
| 1        | $100               | $100  | $100      | 
| 2        | $80                | $80   | $80       | 
| 3        | $70                | $70   | $70       | 
| 4        | $60                | $60   | $60       | 
| 5        | $50                | $50   | $50       | 
| 6        | $40                | $40   | $40       | 
| 7        | $30                | $30   | $30       |

The marginal cost is given as $18 for each jersey. To find the profit-maximizing output, we need to keep selling jerseys as long as MR > MC.

For the first jersey, MR=$100 and MC=$18, so the Rangers should sell the jersey. For the second jersey, MR=$80 and MC=$18, so they should sell that jersey too. For the third jersey, MR=$70 and MC=$18, so again they should sell the jersey. This continues until we reach the seventh jersey, where MR=$30 and MC=$18. At this point, the Rangers should not sell any more jerseys, since the marginal revenue is less than the marginal cost.

So the profit-maximizing output for the Rangers is 7 jerseys. To find the profit, we need to calculate the total revenue and total cost. The total revenue is the sum of the prices for each jersey sold:

Total revenue = $100 + $80 + $70 + $60 + $50 + $40 + $30 = $430

The total cost is just the cost of producing the 7 jerseys:

Total cost = 7 * $18 = $126

Therefore, the profit for the Rangers at the profit-maximizing output is:

Profit = Total revenue - Total cost = $430 - $126 = $304

Thus, the answer is C) $600.