Table 15-2
Dreher's Designer Shirt Company,a monopolist,has the following cost and revenue information.

-Refer to Table 15-2.What is the marginal cost of the 8th shirt?

Question

Table 15-2
Dreher's Designer Shirt Company,a monopolist,has the following cost and revenue information.
 
-Refer to Table 15-2.What is the marginal cost of the 8th shirt?

Quizplus · Accepted Answer

The marginal cost of the 8th shirt can be found by subtracting the cost of producing 8 shirts ($720) from the cost of producing 9 shirts ($810). So, marginal cost = $90. To determine the best choice, we need to compare marginal cost to marginal revenue (which can be found in the last column of the table). The marginal revenue for the 8th shirt is $80, which is less than the marginal cost of $90. Therefore, producing the 8th shirt would result in a loss. The best choice for the firm is to produce up to the quantity where marginal cost equals marginal revenue, which is 7 shirts in this case.

Table 15-2 Dreher's Designer Shirt Company,a Monopolist,has the Following Cost and Revenue