Table 13-3

Table 13-3 shows the demand and cost schedules for a monopolistically competitive firm.
-Refer to Table 13-3.What are the profit-maximizing/loss-minimizing output level and price?
A)Q = 0 (firm should not produce)
B)Q = 3; P = $18
C)Q = 4; P = $17
D)Q = 5; P = $16

Question

Table 13-3
  
Table 13-3 shows the demand and cost schedules for a monopolistically competitive firm.
-Refer to Table 13-3.What are the profit-maximizing/loss-minimizing output level and price?
A)Q = 0 (firm should not produce) 
B)Q = 3; P = $18 
C)Q = 4; P = $17 
D)Q = 5; P = $16

Quizplus · Accepted Answer

To find the profit-maximizing/loss-minimizing level of output, we need to find the quantity where MR = MC. In this case, the quantity at which MR = MC is 4. At this output level, the price is $17, which is the point on the demand curve corresponding to Q = 4. The firm will make zero economic profit at this output level, but will not make a loss. Therefore, the best choice is C.

Table 13-3 Table 13-3 Shows the Demand and Cost Schedules for a and Cost