Table 10.1
$$\begin{array} { c c c }
\mathrm { Q } & \mathrm { P } ( \$ ) & \mathrm { TC } ( \$ ) \
\hline 1 & 27 & 10 \
2 & 24 & 17 \
3 & 21 & 32 \
4 & 18 & 47 \
5 & 15 & 67
\end{array}$$
-Refer to Table 10.1,which shows the output,price,and total cost for a monopolistic competitor.At the profit-maximizing output,the monopolistically competitive firm is in _____

Question

Table 10.1
 $$\begin{array} { c c c } 
\mathrm { Q } & \mathrm { P } ( \$ ) & \mathrm { TC } ( \$ ) \
\hline 1 & 27 & 10 \
2 & 24 & 17 \
3 & 21 & 32 \
4 & 18 & 47 \
5 & 15 & 67
\end{array}$$
-Refer to Table 10.1,which shows the output,price,and total cost for a monopolistic competitor.At the profit-maximizing output,the monopolistically competitive firm is in _____

Quizplus · Accepted Answer

To determine the profit-maximizing output for a monopolistically competitive firm, we look for the output level where marginal revenue (MR) equals marginal cost (MC). Without explicit MR and MC data, we can infer from the context that the firm is maximizing profit by choosing an output level where price (P) is likely to exceed average total cost (ATC). The table doesn't provide direct information on MR or MC, but we can deduce the firm's situation based on the given data.For a monopolistically competitive firm, profit maximization occurs where MR = MC. Although the table doesn't directly show MR or MC, we can infer that at the profit-maximizing output, the firm's price is set above its average total cost (since monopolistic competitors have some degree of market power allowing them to set prices above costs), indicating a short-run scenario where the firm can earn economic profits. This situation aligns with choice C, as it suggests the firm is in a short-run equilibrium with price greater than average total cost, allowing for the possibility of economic profits.

Table 101 -Refer to Table 10