Question

Answer the question based on the demand and cost schedules for a monopolistically competitive firm given...

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.

Homework Answers

Answer #1

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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