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 24.2
What is the profit-maximizing output level for the monopoly firm described in Table 24.2 if the firm is earning a positive economic profit?
A)1 unit
B)2 units
C)3 units
D)5 units
E)6 units

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 24.2
 What is the profit-maximizing output level for the monopoly firm described in Table 24.2 if the firm is earning a positive economic profit?
A)1 unit 
B)2 units 
C)3 units 
D)5 units 
E)6 units

Quizplus · Accepted Answer

To determine the profit-maximizing output level for the monopoly firm, we need to compare the price charged by the firm with its marginal cost. As long as the marginal cost is less than the price, the firm can increase its profit by producing more units. However, at some point, the marginal cost will become greater than the price, and producing additional units will result in a decrease in profit.

From the given table, we can see that the marginal cost increases with the level of output. At the output level of 5 units, the marginal cost is $7, which is equal to the price charged by the firm. Therefore, producing more than 5 units will result in a decrease in profit for the firm. Thus, the profit-maximizing output level for the monopoly firm is 5 units.

The Table Given Below Shows the Price Charged by a Firm