Use the following to answer question:
-(Table: Demand for Lenny's Coffee)Use Table: Demand for Lenny's Coffee.Lenny's Café is the only source of coffee for hundreds of miles in any direction.If Lenny's marginal cost of selling coffee is a constant $2,his profit-maximizing level of output is _____ cups at _____ per cup.
A)4;$6
B)8;$3
C)5;$5
D)3;$7

Question

Use the following to answer question: 
-(Table: Demand for Lenny's Coffee)Use Table: Demand for Lenny's Coffee.Lenny's Café is the only source of coffee for hundreds of miles in any direction.If Lenny's marginal cost of selling coffee is a constant $2,his profit-maximizing level of output is _____ cups at _____ per cup.
A)4;$6 
B)8;$3 
C)5;$5 
D)3;$7

Quizplus · Accepted Answer

Lenny's profit-maximizing level of output is where marginal cost equals marginal revenue. The marginal cost is constant at $2, so the marginal revenue must also be $2. The demand curve shows that the marginal revenue is $2 at a quantity of 4 cups. Therefore, Lenny's profit-maximizing level of output is 4 cups. The price per cup is then determined by the demand curve, which shows that the price is $6 at a quantity of 4 cups.

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