Table 11-5
$\begin{array}{|c|c|c|}
\hline \text { Quantity } & \text { Price } & \text { Total Cost } \
\hline 1 & \$ 18 & \$ 14 \
\hline 2 & 16 & 20 \
\hline 3 & 14 & 26 \
\hline 4 & 12 & 32 \
\hline 5 & 10 & 38 \
\hline 6 & 8 & 44 \
\hline
\end{array}$ Table 11-5 shows the demand and cost data facing a monopolistically competitive producer of canvas bags.
-Refer to Table 11-5.At the profit-maximizing or loss-minimizing output level
A) the firm makes a profit of $12.
B) the firm incurs a loss equal to its fixed cost.
C) the firm makes a profit of $16.
D) the firm incurs a loss of $14.

Question

Table 11-5
 $\begin{array}{|c|c|c|}
\hline \text { Quantity } & \text { Price } & \text { Total Cost } \
\hline 1 & \$ 18 & \$ 14 \
\hline 2 & 16 & 20 \
\hline 3 & 14 & 26 \
\hline 4 & 12 & 32 \
\hline 5 & 10 & 38 \
\hline 6 & 8 & 44 \
\hline
\end{array}$ Table 11-5 shows the demand and cost data facing a monopolistically competitive producer of canvas bags.
-Refer to Table 11-5.At the profit-maximizing or loss-minimizing output level
A) the firm makes a profit of $12.
B) the firm incurs a loss equal to its fixed cost.
C) the firm makes a profit of $16.
D) the firm incurs a loss of $14.

Quizplus · Accepted Answer

The profit-maximizing (or loss-minimizing) output level occurs where marginal revenue (MR) equals marginal cost (MC). From the table, we can calculate that MR is decreasing at a faster rate than MC, indicating that the firm should produce a quantity of 4. At this output level, the price is $12 and the total cost is $32, resulting in a profit of $16 ($48 in revenue minus $32 in total cost). Therefore, choice C is the correct answer.

Table 11-5 Table 11-5 Shows the Demand and Cost Data Facing a Price