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

-Refer to Table 15-2.Which of the following quantities will achieve the maximum profit?

Question

Table 15-2
Dreher's Designer Shirt Company,a monopolist,has the following cost and revenue information.
 
-Refer to Table 15-2.Which of the following quantities will achieve the maximum profit?

Quizplus · Accepted Answer

To maximize profit, a monopolist should produce where MR=MC. Looking at the table, at Q=3, MR=28 and MC=19, so producing 3 shirts would result in a profit of 3(28-19)=81. At Q=4, MR=24 and MC=20, so producing 4 shirts would result in a profit of 4(24-20)=16. At Q=6, MR=18 and MC=18, so producing 6 shirts would result in a profit of 6(18-18)=0. At Q=7, MR=14 and MC=20, so producing 7 shirts would result in a profit of 7(14-20)=-42. Therefore, the best quantity to achieve maximum profit is 6.

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