Use the following to answer questions :
Table 9-1
-Suppose an imperfect competitor faces the demand curve defined in Table 9-1, and its MC is constant at $2.00.If the firm is able to produce at any output level, then it maximizes profits at:
A)P = 5; q = 8
B)P = 4; q = 12.
C)P = 3; q = 17.
D)P = 2; q = 22.
E)none of the above if fixed costs are less than $1.00.

Question

Use the following to answer questions :
Table 9-1 
-Suppose an imperfect competitor faces the demand curve defined in Table 9-1, and its MC is constant at $2.00.If the firm is able to produce at any output level, then it maximizes profits at:
A)P = 5; q = 8 
B)P = 4; q = 12. 
C)P = 3; q = 17. 
D)P = 2; q = 22. 
E)none of the above if fixed costs are less than $1.00.

Quizplus · Accepted Answer

To maximize profits, the firm produces where marginal revenue equals marginal cost, which is at output level q = 12, where P = $4 (as shown in the table). At q = 12, MR = $4, which is also equal to MC = $2. At any output level above or below this, the firm earns less than maximum profits. Therefore, the best choice is B.

Use the Following to Answer Questions