Table 9.5
$$\begin{array} { | c | c | c | }
\hline \text { Quantity } & \begin{array} { c }
\text { Price } \
\text { (dollars) }
\end{array} & \begin{array} { c }
\text { Total Cost } \
\text { (dollars) }
\end{array} \
\hline 1 & 18 & 14 \
\hline 2 & 16 & 20 \
\hline 3 & 14 & 26 \
\hline 4 & 12 & 32 \
\hline 5 & 10 & 38 \
\hline 6 & 8 & 44 \
\hline
\end{array}$$ Table 9.5 shows the demand and cost data facing a monopolistically competitive producer of canvas bags.
-Refer to Table 9.5.The firm's profit-maximising or loss-minimising price and quantity are ________.

Question

Table 9.5
 $$\begin{array} { | c | c | c | } 
\hline \text { Quantity } & \begin{array} { c } 
\text { Price } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Total Cost } \
\text { (dollars) }
\end{array} \
\hline 1 & 18 & 14 \
\hline 2 & 16 & 20 \
\hline 3 & 14 & 26 \
\hline 4 & 12 & 32 \
\hline 5 & 10 & 38 \
\hline 6 & 8 & 44 \
\hline
\end{array}$$ Table 9.5 shows the demand and cost data facing a monopolistically competitive producer of canvas bags.
-Refer to Table 9.5.The firm's profit-maximising or loss-minimising price and quantity are ________.

Quizplus · Accepted Answer

To maximize profit, the firm should produce where marginal revenue (MR) equals marginal cost (MC), which occurs at a quantity of 4. At this quantity, the firm can charge a price of $12, which is above the average total cost (ATC) of $11.75, resulting in a positive economic profit. At any other price or quantity, the firm would earn less profit or incur a loss. Therefore, the profit-maximising or loss-minimising price and quantity are price = $12; quantity = 4. 
Option A is incorrect because it suggests a lower price than the profit-maximising price.
Option C is incorrect because the firm can earn a positive economic profit at the profit-maximising quantity and price.
Option D is incorrect because the profit-maximising price and quantity can be determined from the given information.

Table 95 Table 95 Shows the Demand and Cost Data Facing a Monopolistically