The table given below shows the price charged by a firm and the marginal cost incurred by it for different levels of the output.Table 11.2

-Assume that the firm described in Table 11.2 is incurring a total cost of $25, at the profit-maximizing output level. The firm will:
A)lose $10 in the short run.
B)break even.
C)earn a profit of $50.
D)earn a profit of $30.
E)earn a profit of $55.

Question

The table given below shows the price charged by a firm and the marginal cost incurred by it for different levels of the output.Table 11.2
 
-Assume that the firm described in Table 11.2 is incurring a total cost of $25, at the profit-maximizing output level. The firm will:
A)lose $10 in the short run. 
B)break even. 
C)earn a profit of $50. 
D)earn a profit of $30. 
E)earn a profit of $55.

Quizplus · Accepted Answer

To determine the profit-maximizing output level, we need to find the level of output where marginal revenue (MR) equals marginal cost (MC). Looking at the table, we can see that the profit maximizing output level is 5. At this output level, the firm charges a price of $10 and incurs a marginal cost of $5, resulting in a profit per unit of $5. Therefore, at an output level of 5, the firm earns a profit of $25 (5 units x $5 profit per unit), which covers its total cost of $25. Therefore, the firm breaks even at the profit-maximizing output level.

The Table Given Below Shows the Price Charged by a Firm