Use this information to answer the following questions:

-If a company is a profit-maximizing firm and can charge a single price in both cities,how much would its profit be?
A) $6
B) $20
C) $25
D) $60
E) $64

Question

Use this information to answer the following questions:

-If a company is a profit-maximizing firm and can charge a single price in both cities,how much would its profit be? 
A) $6 
B) $20 
C) $25 
D) $60 
E) $64

Quizplus · Accepted Answer

To maximize profit, the firm should charge the highest price possible in both cities. In this case, that would be $35 in City A and $25 in City B. The firm would sell 2 units in City A, generating revenue of 2 x $35 = $70, and 2 units in City B, generating revenue of 2 x $25 = $50. 
Total revenue = $70 + $50 = $120 
Total cost = $95 (2 units at $25 each in City A and 2 units at $20 each in City B)

Profit = Total revenue - Total cost = $120 - $95 = $25

Therefore, the best choice is C, with a profit of $25.

Use This Information to Answer the Following Questions