Exhibit 9-8
-Consider Exhibit 9-8. What is the profit-maximizing price?

Question

Exhibit 9-8 
-Consider Exhibit 9-8. What is the profit-maximizing price?

Quizplus · Accepted Answer

In order to determine the profit-maximizing price, we need to find the point on the graph where marginal revenue equals marginal cost. This occurs at a quantity sold of 30 units, where marginal revenue is $30 and marginal cost is $6. At this quantity, the total revenue is ($23.33 x 30) = $700, and the total cost is ($6 x 30) = $180. Therefore, the profit is ($700 - $180) = $520. Dividing by the quantity of 30 units gives an average profit of $17.33 per unit. Since the average profit is highest at a price of $23.33, this is the profit-maximizing price.

Exhibit 9-8 -Consider Exhibit 9-8. What Is the Profit-Maximizing Price