Table 10.2 Eco Energy is a monopolistically competitive producer of a sports beverage called Power On.Table 10.2 shows the firm's demand and cost schedules.
-Refer to Table 10.2.Eco Energy's profit is
A)$125
B)$140
C)$145
D)$150

Question

Table 10.2  Eco Energy is a monopolistically competitive producer of a sports beverage called Power On.Table 10.2 shows the firm's demand and cost schedules.
-Refer to Table 10.2.Eco Energy's profit is
A)$125 
B)$140 
C)$145 
D)$150

Quizplus · Accepted Answer

To find the profit-maximizing output, we need to produce the quantity where marginal revenue (MR) equals marginal cost (MC). In this case, that quantity is 5 units, where MR = MC = $25. At that level of output, the price charged will be $29 per unit, which we find from the demand curve.

The total cost of producing 5 units is $60 ($10 per unit). Therefore, the total revenue is $145 ($29 per unit x 5 units). Profit is total revenue minus total cost, so:

Profit = Total revenue - Total cost
Profit = $145 - $60
Profit = $85

Thus, the profit-maximizing output is 5 units, and Eco Energy's profit is $145.

Table 102 Eco Energy Is a Monopolistically Competitive Producer of of a Sports