Refer to the accompanying table.A firm participating in a competitive market with these costs would be making a profit if the price is

Question

Quizplus · Accepted Answer

To determine the profit-maximizing output level, we need to find where marginal revenue equals marginal cost. Looking at the table, we can see that the marginal cost is constant at $4 per unit. To find the marginal revenue, we can calculate the change in total revenue when increasing output by one unit. For example, when output increases from 3 units to 4 units, total revenue increases from $18 to $22, resulting in a marginal revenue of $4. Continuing this calculation for each level of output, we can see that marginal revenue is constant at $8 per unit. Therefore, the profit-maximizing output level is where marginal revenue equals marginal cost, which is at an output of 5 units. At this output level, the total cost is $20, and the total revenue is $40, resulting in a profit of $20. With a profit at the output of 5 units, the firm can set a price of $8 per unit to maximize their profit. Thus, the correct answer is B.

Refer to the Accompanying Table