Use the following to answer questions :
-(Table: Spring Water)Use Table: Spring Water.The table shows the demand and cost data for a firm in a monopolistically competitive industry producing drinking water from underground springs.The profit-maximizing price is:

Question

Use the following to answer questions : 
-(Table: Spring Water)Use Table: Spring Water.The table shows the demand and cost data for a firm in a monopolistically competitive industry producing drinking water from underground springs.The profit-maximizing price is:

Quizplus · Accepted Answer

To find the profit-maximizing price, we need to look for the price where marginal revenue (MR) equals marginal cost (MC). At a price of $16, the quantity demanded is zero, so the MR is also zero. At a price of $3, the MC is $16, which is greater than the revenue generated, so this cannot be the profit-maximizing price. At a price of $5, the MC is $10, which is equal to the MR, so this could be a possible profit-maximizing price. However, at a price of $10, the MC is $5, which is less than the revenue generated, indicating that this is the profit-maximizing price. Therefore, the answer is D.

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