Refer to the figure below. During high-peak times, what price-quantity combination should the firm charge to maximize profit? A) P₁ and Q₃ B) P₂ and Q₃ C) P₄ and Q₃ D) P₁ and Q₂

Question

Quizplus · Accepted Answer

During high-peak times, the firm should charge the price where the marginal revenue (MR) equals marginal cost (MC). From the graph, we can see that the marginal cost intersects the marginal revenue curve at point Q1. The corresponding price is P₄ and the quantity is Q₃. Thus, the best choice is C.

Refer to the Figure Below