Answer the question on the basis of the following data confronting a firm: $\begin{array}{l}
\begin{array}{ccr}
&&\text { Marginal }\
\text { Output } & & \text { Reven } \
\hline
0&&--\
1 & & \$ 16 \
2 & & 16 \
3 & & 16 \
4 & & 16 \
5 & & 16
\end{array}
\begin{array}{c}
Marginal\
Cost\
\hline
--\
\$ 10 \
9 \
13 \
17 \
21
\end{array}
\end{array}$ Refer to the data.Assuming total fixed costs equal to zero,the firm's:
A) economic profit is $12.
B) economic profit is $16.
C) loss is $14.
D) economic profit is $3.

Question

Quizplus · Accepted Answer

The firm's total revenue increase by $16 for every additional unit of output, so the MR is $16. To maximize profits, the firm should produce at the quantity where MR=MC. From the data, the MC equals $10 for the first unit, $9 for the second unit, $13 for the third unit, $17 for the fourth unit, and $21 for the fifth unit. Therefore, the firm will maximize profit by producing 3 units of output where MR=MC at a total cost of $39 and total revenue of $48, resulting in an economic profit of $9.

Answer the Question on the Basis of the Following Data