Use the following to answer question:
Figure: Demand and Marginal Revenue
-(Figure: Demand and Marginal Revenue)Use Figure: Demand and Marginal Revenue.The figure refers to a software upgrade.The producer incurred fixed costs of $10 million to produce the upgrade;the marginal cost of allowing consumers to download the upgrade is zero.To maximize profit,the producer will set a price of _____ and produce _____ upgrades.
A)$100;125,000
B)$100;250,000
C)$50;125,000
D)$0;250,000

Question

Use the following to answer question:
Figure: Demand and Marginal Revenue 
-(Figure: Demand and Marginal Revenue)Use Figure: Demand and Marginal Revenue.The figure refers to a software upgrade.The producer incurred fixed costs of $10 million to produce the upgrade;the marginal cost of allowing consumers to download the upgrade is zero.To maximize profit,the producer will set a price of _____ and produce _____ upgrades.
A)$100;125,000 
B)$100;250,000 
C)$50;125,000 
D)$0;250,000

Quizplus · Accepted Answer

The profit will be maximized where marginal revenue (MR) equals marginal cost (MC). In the given figure, MR intersects MC at a quantity of 125,000 upgrades. The corresponding price is $50. Therefore, the producer should set a price of $50 and produce 125,000 upgrades to maximize profit.

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