Table 16-5
Traci's Hairstyling is one salon among many in the market for hairstyling.The following table presents cost and revenue data for hair cuts at Traci's Hairstyling.

-Refer to Table 16-5.If the government forced Traci's to produce at the efficient scale of output,what is the maximum profit Traci's could earn?

Question

Table 16-5
Traci's Hairstyling is one salon among many in the market for hairstyling.The following table presents cost and revenue data for hair cuts at Traci's Hairstyling.
 
-Refer to Table 16-5.If the government forced Traci's to produce at the efficient scale of output,what is the maximum profit Traci's could earn?

Quizplus · Accepted Answer

The efficient scale of output is where marginal cost equals marginal revenue, which occurs at a quantity of 4 haircuts. At a quantity of 4 haircuts, the marginal cost is $21 and the marginal revenue is $25, resulting in a profit of $4 per haircut. The maximum profit Traci's could earn at the efficient scale of output of 4 haircuts is $16 ($4 per haircut x 4 haircuts), and the total revenue would be $100 ($25 price per haircut x 4 haircuts). Therefore, the correct answer is C, $84.

Table 16-5 Traci's Hairstyling Is One Salon Among Many in the Market