Figure 16-10
The figure is drawn for a monopolistically-competitive firm.
-Refer to Figure 16-10. When the firm is maximizing its profit,
A)TR = $9,000 and TC =$16,000.
B)TR = $14,000 and TC =$16,000.
C)TR = $16,000 and TC =$16,000.
D)MC exceeds MR by $66.66 on the last unit of output produced.

Question

Figure 16-10
The figure is drawn for a monopolistically-competitive firm. 
-Refer to Figure 16-10. When the firm is maximizing its profit,
A)TR = $9,000 and TC =$16,000. 
B)TR = $14,000 and TC =$16,000. 
C)TR = $16,000 and TC =$16,000. 
D)MC exceeds MR by $66.66 on the last unit of output produced.

Quizplus · Accepted Answer

At the profit-maximizing level of output, the firm produces where MR = MC, which in this case is at a quantity of 4 units. At this level of output, the firm's total revenue is $14,000 and its total cost is $16,000, resulting in a loss of $2,000. This is the best choice because it represents the point at which the firm is maximizing its profit within the constraints of the market structure. Option A is incorrect because it implies that the firm is experiencing a loss; option C is incorrect because it implies that the firm is earning zero economic profit; and option D is irrelevant to the question.

Figure 16-10 The Figure Is Drawn for a Monopolistically-Competitive Firm