Given the data shown in the table, what price and output level would a profit-maximizing price searcher choose?

Question

Quizplus · Accepted Answer

A profit-maximizing price searcher will set the output level where marginal revenue (MR) equals marginal cost (MC) and then charge the highest price that consumers are willing to pay for that output level. In this case, the MC for all output levels is $3. At an output level of 4 units, the MR is $5. Therefore, the profit-maximizing price searcher will choose a price of $7 and an output level of 4 units. This combination will result in a total revenue of $28 ($7 per unit x 4 units), total cost of $12 ($3 per unit x 4 units), and total profit of $16. At any other output level, the profit will be lower.

Given the Data Shown in the Table, What Price and Output