The table given below shows the price charged by a firm and the marginal cost incurred by it for the different levels of the output. Table 10.2
What is the profit-maximizing output level for the monopoly firm described in Table 10.2 if the firm is earning a positive economic profit?

Question

The table given below shows the price charged by a firm and the marginal cost incurred by it for the different levels of the output. Table 10.2
 What is the profit-maximizing output level for the monopoly firm described in Table 10.2 if the firm is earning a positive economic profit?

Quizplus · Accepted Answer

To find the profit-maximizing output level, we need to compare the price and marginal cost for each unit of output. 
At 5 units of output, the marginal cost is $10, which is equal to the price. Therefore, the profit-maximizing output level for the firm is 5 units. 
If the firm produces less than 5 units, it can increase its profit by producing more units until the marginal cost becomes equal to the price. If the firm produces more than 5 units, the marginal cost will exceed the price, which will reduce the firm's profit.

The Table Given Below Shows the Price Charged by a Firm