Table 14-9
Suppose that a firm in a competitive market faces the following revenues and costs:
-Refer to Table 14-9. In order to maximize profit, the firm will produce a level of output where marginal revenue is equal to
A)$6.
B)$7.
C)$8.
D)$9.

Question

Table 14-9
Suppose that a firm in a competitive market faces the following revenues and costs: 
-Refer to Table 14-9. In order to maximize profit, the firm will produce a level of output where marginal revenue is equal to
A)$6. 
B)$7. 
C)$8. 
D)$9.

Quizplus · Accepted Answer

To maximize profit, the firm should produce where MR=MC. Looking at the table, the marginal cost is $6 at both Q=3 and Q=4. At Q=3, the marginal revenue is $8 which is greater than $6, meaning the firm can increase its profit by producing more. At Q=4, the marginal revenue is $8 which is equal to $6 MC. Therefore, the profit-maximizing level of output is Q=4 where MR=MC=$6. At this output level, the firm's profit would be ($8-$6) x 4 - $16 = $0.

Table 14-9 Suppose That a Firm in a Competitive Market Faces the Faces