Table 16-4
This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm.
-Refer to Table 16-4. What is this firm's profit-maximizing level of output?
A)0 units of output
B)3 units of output
C)4 units of output
D)5 units of output

Question

Table 16-4
This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. 
-Refer to Table 16-4. What is this firm's profit-maximizing level of output?
A)0 units of output 
B)3 units of output 
C)4 units of output 
D)5 units of output

Quizplus · Accepted Answer

The profit-maximizing level of output is where marginal revenue equals marginal cost. In this case, we can see from the table that at 4 units of output, marginal revenue equals marginal cost ($18). At this level of output, the firm will be able to earn a positive profit as it will be able to charge a price that is above its average total cost. At any other level of output, the firm will not be maximizing its profit. Therefore, the best choice is C, which is 4 units of output.

Table 16-4 This Table Shows the Demand Schedule, Marginal Cost, and Average