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Exhibit 24-7 Price Quantity Total Cost $10 10 $80 9 15 85 8 20 95 7 25 110 6 30 140 5 35 175 4 40 215 Refer to Exhibit 24-7. A monopolistic competitive firm that seeks to maximize profits will sell __________ units and charge a price of __________ . a. 30; $6 b. 15; $9 c. 25; $7 d. 10; $10 e. 35; $5

Respuesta :

Answer:

The correct option is c. 25; $7.

That is, a monopolistic competitive firm that seeks to maximize profits will sell 25 units and charge a price of $7.

Explanation:

Note: This the data in this question are merged together. They are therefore sorted before answering the question. See the attached pdf file for the complete question with the sorted data.

The explanation to the answer is now given as follows:

In economics, a monopolistic competitive firm maximizes profit at a point where its Marginal Cost (MC) equals its Marginal Revenue (MR), i.e. where MC = MR.

Note: See the attached excel file for the calculation of the Marginal Cost (MC) equals its Marginal Revenue (MR).

In the attached excel file, we use the following formula:

Total revenue = Price * Quantity

Marginal cost = Current total cost - Previous total cost

Marginal revenue = Current total revenue - Previous total revenue

In the attached excel file, Marginal Cost (MC) equals Marginal Revenue (MR) equals $15 (i.e. MC = MR = $15) at the point where Price is $7 and Quantity is 25 (This is indicated in bold red color)

Therefore, the correct option is c. 25; $7. That is, a monopolistic competitive firm that seeks to maximize profits will sell 25 units and charge a price of $7.

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