Answer the question based on the demand and cost schedules for a monopolistically competitive firm given in the table below.
Price | Quantity Demanded | Total Cost | Output |
$30 | 1 | $10 | 1 |
27 | 2 | 20 | 2 |
24 | 3 | 29 | 3 |
21 | 4 | 36 | 4 |
15 | 5 | 40 | 5 |
10 | 6 | 42 | 6 |
At the profit-maximizing level of output, marginal revenue is
Multiple Choice
$21.
$84.
$12.
$5.
Ans:
marginal revenue = $21
Explanation
Price | Output | Total cost | Marginal cost |
$30 | 1 | $10 | $10 |
$27 | 2 | $20 | $10 |
$24 | 3 | $29 | $9 |
$21 | 4 | $36 | $7 |
$15 | 5 | $40 | $4 |
$10 | 6 | $42 | $2 |
Monopolistic competition is a market structure where many firms sell differentiated products. The monopolistic competitive firm maximizes profits where marginal revenue is above or equals to marginal cost. Profit is maximum at an output of 4 units. When the output is 4 units, marginal revenue is $21 and marginal cost is $7.
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