Use the following to answer questions:
Figure: Monopolistic Competition III
-(Figure: Monopolistic Competition III) The figure Monopolistic Competition III shows the demand, marginal revenue, marginal cost, and average total cost curves for Pat's Pizza Parlor, a monopolistic competitor in the food-to-go industry. The optimal level of output for Pat's Pizza Parlor is _____ and the profit-maximizing price is _____.
A) 350; $3.50
B) 350; $7.00
C) 590; $5.60
D) 500; $5.50

Question

Use the following to answer questions:
Figure: Monopolistic Competition III 
-(Figure: Monopolistic Competition III) The figure Monopolistic Competition III shows the demand, marginal revenue, marginal cost, and average total cost curves for Pat's Pizza Parlor, a monopolistic competitor in the food-to-go industry. The optimal level of output for Pat's Pizza Parlor is _____ and the profit-maximizing price is _____.
A) 350; $3.50 
B) 350; $7.00 
C) 590; $5.60 
D) 500; $5.50

Quizplus · Accepted Answer

The optimal level of output is where marginal cost equals marginal revenue, which is at 350 units. The profit-maximizing price is determined by the demand curve at this output level, which is $7.00.

Use the Following to Answer Questions