Table 14-12
The following table provides information on the price,quantity,and average total cost for a monopoly.

-Refer to Table 14-12.At what price will the firm maximize its profit?
A) $1
B) $2
C) $3
D) $4

Question

Table 14-12
The following table provides information on the price,quantity,and average total cost for a monopoly.
 
-Refer to Table 14-12.At what price will the firm maximize its profit?
A) $1 
B) $2 
C) $3 
D) $4

Quizplus · Accepted Answer

The firm will maximize its profit at the price where marginal revenue equals marginal cost. Looking at the table, the marginal cost is equal to $2 at a quantity of 4 and then increases to $4 at a quantity of 5. Therefore, the profit-maximizing quantity is 4, and at that quantity, the marginal revenue is also $3. Thus, the firm will maximize its profit by setting the price at $3.

Table 14-12 The Following Table Provides Information on the Price,quantity,and Average Total