$\text {Demand and Cost Data for Will's Beach Ball Company}$

$\begin{array}{l}
\begin{array}{cccc}
&\text { Demand Data}& \text { Cost Data }\
\text { Price } & \text { Quantity } & \text { Output } & \text { Total Cost } \
\$ 11 & 6 & 6 & \$ 48 \
\$ 10 & 7 & 7 & \$ 52 \
\$ 9 & 8 & 8 & \$ 57 \
\$ 8 & 9 & 9 & \$ 63 \
\$ 7 & 10 & 10 & \$ 70
\end{array}
\end{array}$

$\text {Table $26.1$}$
$\text {A Monopolistically Competitive Firm}$ Refer to Table 26.1.In order to maximize profit, Will's Beach Ball Company should produce _______ and charge a price of _______ each.

Question

$\text {Demand and Cost Data for Will's Beach Ball Company}$

$\begin{array}{l}
\begin{array}{cccc}
&\text { Demand Data}& \text { Cost Data }\
\text { Price } & \text { Quantity } & \text { Output } & \text { Total Cost } \
\$ 11 & 6 & 6 & \$ 48 \
\$ 10 & 7 & 7 & \$ 52 \
\$ 9 & 8 & 8 & \$ 57 \
\$ 8 & 9 & 9 & \$ 63 \
\$ 7 & 10 & 10 & \$ 70
\end{array}
\end{array}$

$\text {Table $26.1$}$
$\text {A Monopolistically Competitive Firm}$ Refer to Table 26.1.In order to maximize profit, Will's Beach Ball Company should produce _______ and charge a price of _______ each.

Quizplus · Accepted Answer

To maximize profit, a firm should produce where marginal cost (MC) is equal to marginal revenue (MR). The change in total cost as output increases from one level to the next gives us the MC for producing an additional unit. From the table, the MC of increasing output from 6 to 7 beach balls is $4 ($52 - $48), from 7 to 8 is $5 ($57 - $52), and from 8 to 9 is $6 ($63 - $57). The change in total revenue (price × quantity) as output increases gives us MR. The MR of increasing sales from 6 to 7 beach balls is $10 (since the price is $10 for the 7th ball and we ignore the reduction in price for the initial balls for this calculation), from 7 to 8 is $9, and from 8 to 9 is $8. The point where MC first equals or exceeds MR is when moving from 7 to 8 beach balls, as MC ($5) equals MR ($9) just before that point. Therefore, to maximize profit, Will's Beach Ball Company should produce 7 beach balls and charge $10 each.

Demand and Cost Data for Will’s Beach Ball Company\text {Demand and Cost Data for Will's Beach Ball Company}Demand and Cost Data for Will’s Beach Ball Company

$\text {Demand and Cost Data for Will's Beach Ball Company}$