Table 11-5
$\begin{array}{|c|c|c|}
\hline \text { Quantity } & \text { Price } & \text { Total Cost } \
\hline 1 & \$ 18 & \$ 14 \
\hline 2 & 16 & 20 \
\hline 3 & 14 & 26 \
\hline 4 & 12 & 32 \
\hline 5 & 10 & 38 \
\hline 6 & 8 & 44 \
\hline
\end{array}$ Table 11-5 shows the demand and cost data facing a monopolistically competitive producer of canvas bags.
-Refer to Table 11-5.What are the firm's profit-maximizing or loss-minimizing price and quantity?
A) price = $10; quantity = 5.
B) price = $12; quantity = 4.
C) The firm should shut down temporarily.
D) This cannot be determined from the information given.

Question

Table 11-5
 $\begin{array}{|c|c|c|}
\hline \text { Quantity } & \text { Price } & \text { Total Cost } \
\hline 1 & \$ 18 & \$ 14 \
\hline 2 & 16 & 20 \
\hline 3 & 14 & 26 \
\hline 4 & 12 & 32 \
\hline 5 & 10 & 38 \
\hline 6 & 8 & 44 \
\hline
\end{array}$ Table 11-5 shows the demand and cost data facing a monopolistically competitive producer of canvas bags.
-Refer to Table 11-5.What are the firm's profit-maximizing or loss-minimizing price and quantity?
A) price = $10; quantity = 5.
B) price = $12; quantity = 4.
C) The firm should shut down temporarily.
D) This cannot be determined from the information given.

Quizplus · Accepted Answer

To find the profit-maximizing quantity, we need to look for the quantity at which Marginal Revenue (MR) equals Marginal Cost (MC). From the table, we see that the profit-maximizing quantity occurs when the firm produces 4 units (where MR = MC = $12).
To find the profit-maximizing price, we can look at the Total Revenue (TR) column and see that the TR for 4 units is $48. We can also look at the Total Cost (TC) column and see that the TC for 4 units is $32. Therefore, the profit for producing 4 units is $16.
We can also check the profit for producing 5 units and see that the profit decreases to $6. Therefore, the firm's profit-maximizing or loss-minimizing price and quantity are $12 and 4 units, respectively.

Table 11-5 Table 11-5 Shows the Demand and Cost Data Facing a Price