$\text {Demand and Cost Data for Sylvie's Shampoo Company}$

$\begin{array}{cccc}
\text { Price } & \begin{array}{c}
\text { Demand Data } \
\text { Quantity }
\end{array} & \begin{array}{c}
\text { Cost Data } \
\text { Output }
\end{array} & \text { Total Cost } \
\$ 22 & 6 & 6 & \$ 96 \
\$ 20 & 7 & 7 & \$ 104 \
\$ 18 & 8 & 8 & \$ 114 \
\$ 16 & 9 & 9 & \$ 126 \
\$ 14 & 10 & 10 & \$ 140
\end{array}$

$\text {Table $26.2$}$
$\text {A Monopolistically Competitive Firm}$ Refer to Table 26.2.At the profit-maximizing output and price, Sylvie's Shampoo Company.will earn a
________ economic profit, and ________ the market will occur.

Question

$\text {Demand and Cost Data for Sylvie's Shampoo Company}$

$\begin{array}{cccc}
\text { Price } & \begin{array}{c}
\text { Demand Data } \
\text { Quantity }
\end{array} & \begin{array}{c}
\text { Cost Data } \
\text { Output }
\end{array} & \text { Total Cost } \
\$ 22 & 6 & 6 & \$ 96 \
\$ 20 & 7 & 7 & \$ 104 \
\$ 18 & 8 & 8 & \$ 114 \
\$ 16 & 9 & 9 & \$ 126 \
\$ 14 & 10 & 10 & \$ 140
\end{array}$

$\text {Table $26.2$}$
$\text {A Monopolistically Competitive Firm}$  Refer to Table 26.2.At the profit-maximizing output and price, Sylvie's Shampoo Company.will earn a
________ economic profit, and ________ the market will occur.

Quizplus · Accepted Answer

Explanation: To determine the profit-maximizing output and price, we need to find where marginal revenue (MR) equals marginal cost (MC). Since the table does not provide explicit MR or MC values, we can infer that the profit-maximizing level is where additional revenue from selling one more unit (price) is greater than or equal to the additional cost of producing that unit. The table shows costs increasing as output increases, which is typical due to the law of diminishing returns.Without explicit MR and MC, another approach is to look at total revenue (TR) and total cost (TC) to infer profitability. TR is calculated as Price * Quantity. We calculate TR for each price level:- At $22, TR = $22 * 6 = $132- At $20, TR = $20 * 7 = $140- At $18, TR = $18 * 8 = $144- At $16, TR = $16 * 9 = $144- At $14, TR = $14 * 10 = $140Comparing TR to TC at each level:- At $22, Profit = $132 - $96 = $36- At $20, Profit = $140 - $104 = $36- At $18, Profit = $144 - $114 = $30- At $16, Profit = $144 - $126 = $18- At $14, Profit = $140 - $140 = $0The highest profit occurs at a price of $22 or $20, with a profit of $36. This indicates positive economic profit. Positive economic profit attracts entry into the market, as new firms seek to capture some of the profit.

Demand and Cost Data for Sylvie’s Shampoo Company\text {Demand and Cost Data for Sylvie's Shampoo Company}Demand and Cost Data for Sylvie’s Shampoo Company

$\text {Demand and Cost Data for Sylvie's Shampoo Company}$