The table given below shows the prices charged and marginal cost incurred by a monopolist for different units of output.Table 11.3

-What is the profit-maximizing output level for the monopoly firm described in Table 11.3, if the firm is earning a positive economic profit?
A)1 unit
B)3 units
C)5 units
D)8 units
E)9 units

Question

The table given below shows the prices charged and marginal cost incurred by a monopolist for different units of output.Table 11.3
 
-What is the profit-maximizing output level for the monopoly firm described in Table 11.3, if the firm is earning a positive economic profit?
A)1 unit 
B)3 units 
C)5 units 
D)8 units 
E)9 units

Quizplus · Accepted Answer

To find the profit-maximizing output level for the monopoly firm, we need to first calculate the total revenue and total cost for each level of output. The total revenue can be calculated by multiplying the price by the quantity, and the total cost can be calculated by multiplying the marginal cost by the quantity. The profit can be calculated by subtracting the total cost from the total revenue.

Using the given data, we can create the following table:

| Quantity | Price | Total Revenue | Marginal Cost | Total Cost | Profit |
|----------|-------|---------------|---------------|------------|--------|
| 1        | $16   | $16           | $6            | $6         | $10    |
| 2        | $14   | $28           | $8            | $14        | $14    |
| 3        | $12   | $36           | $10           | $24        | $12    |
| 4        | $10   | $40           | $12           | $36        | $4     |
| 5        | $8    | $40           | $14           | $50        | -$10   |
| 6        | $6    | $36           | $16           | $66        | -$30   |
| 7        | $4    | $28           | $18           | $84        | -$56   |
| 8        | $2    | $16           | $20           | $104       | -$88   |
| 9        | $1    | $9            | $22           | $126       | -$117  |

From the table, we can see that the profit is maximized at a quantity of 8 units, where the profit is -$88. Therefore, the answer is D) 8 units.

The Table Given Below Shows the Prices Charged and Marginal