The table below presents the expected cost and demand schedules confronting Handy John, a chair manufacturer. Given this information, what will be the profit (or loss) of Handy John at the profit-maximizing price?

Question

Quizplus · Accepted Answer

To find profit, we need to calculate Total Revenue (TR) and Total Cost (TC) at different price levels and identify the one that gives the highest profit.

Price = $20: 
Demand = 0 units 
TR = 0 
TC = $500 
Profit = TR - TC = -$500

Price = $15: 
Demand = 100 units 
TR = $1500 
TC = $1000 
Profit = TR - TC = $500

Price = $10: 
Demand = 200 units 
TR = $2000 
TC = $1300 
Profit = TR - TC = $700

Price = $5: 
Demand = 300 units 
TR = $1500 
TC = $1800 
Profit = TR - TC = -$300

Thus, the profit-maximizing price for Handy John is $10, which gives him a profit of $700. Therefore, the answer is C) $150 profit.

The Table Below Presents the Expected Cost and Demand Schedules