Table 15-7
Sally owns the only shoe store in town. She has the following cost and revenue information.
-Refer to Table 15-7. Sally will maximize her profits by selling
A)3 pairs of shoes.
B)4 pairs of shoes.
C)6 pairs of shoes.
D)7 pairs of shoes.

Question

Table 15-7
Sally owns the only shoe store in town. She has the following cost and revenue information. 
-Refer to Table 15-7. Sally will maximize her profits by selling
A)3 pairs of shoes. 
B)4 pairs of shoes. 
C)6 pairs of shoes. 
D)7 pairs of shoes.

Quizplus · Accepted Answer

To maximize profits, Sally should produce at a level where marginal revenue (MR) equals marginal cost (MC). Looking at the table, we can calculate the marginal revenue and marginal cost for each level of output:
- For 3 pairs of shoes, MR = $80 and MC = $60, so MR > MC
- For 4 pairs of shoes, MR = $70 and MC = $65, so MR > MC
- For 6 pairs of shoes, MR = $50 and MC = $50, so MR = MC
- For 7 pairs of shoes, MR = $40 and MC = $65, so MR < MC

Therefore, Sally should produce and sell 6 pairs of shoes to maximize her profits. At this level of output, Sally will earn a total revenue of $300, incur a total cost of $300, and make a profit of $0.

Table 15-7 Sally Owns the Only Shoe Store in Town. She Has