Use the figure below to answer the following question.

Figure 13.2.4
-Refer to Figure 13.2.4. Grannie's is the only cake bakery on Coastal Island. The graph shows Grannie's demand curve, marginal revenue curve, and marginal cost curve. Grannie's profit-maximizing price is ________ a cake and its profit-maximizing output is ________ cakes a week.
A)$28; 12
B)$16; 12
C)$36; 2
D)$16; 24
E)$24; 16

Question

Use the figure below to answer the following question.
  
Figure 13.2.4
-Refer to Figure 13.2.4. Grannie's is the only cake bakery on Coastal Island. The graph shows Grannie's demand curve, marginal revenue curve, and marginal cost curve. Grannie's profit-maximizing price is ________ a cake and its profit-maximizing output is ________ cakes a week.
A)$28; 12 
B)$16; 12 
C)$36; 2 
D)$16; 24 
E)$24; 16

Quizplus · Accepted Answer

Grannie's profit-maximizing price is $28 a cake and its profit-maximizing output is 12 cakes a week. This is because the profit-maximizing price is the price at which the marginal revenue curve intersects the marginal cost curve. The profit-maximizing output is the output at which the marginal revenue curve equals the marginal cost curve.

Use the Figure Below to Answer the Following Question