-Refer to Table 10-5. What are the firm's profit-maximising or loss-minimising price and quantity?
A) price = $10; quantity = 5.
B) price = $12; quantity = 4.
C) The firm should shut down temporarily.
D) This cannot be determined from the information given.

Question

Quizplus · Accepted Answer

In order to maximize profit or minimize loss, the firm should produce where marginal revenue equals marginal cost. At a quantity of 4, marginal revenue is $12 and marginal cost is $12, which means the firm is breaking even. Therefore, the profit-maximizing or loss-minimizing price and quantity is $12 and 4 units.