Question

Can you please help me with #8?

8. In the figure that follows, we see a hypothetical oligopoly firm choosing between maximizing profit and maximizing sales. Answer the questions below about that firm. a. If the oligopoly seeks to maximize profits, what will be its (1) price, (2) output, and (3) total (economic) profit? b. If the oligopoly seeks to maximize sales, what will be its (1) price, (2) output, and (3) total (economic) profit?

Answer 1

When oligopoly seeks to maximize profit:

(1) Price = H

(2) Output = G

(3) Total (economic) profit = E

Oligopoly would maximize profit where marginal cost = marginal revenue i.e. price will be point H, output G and market price E will yield maximum economic profits

　

When oligopoly seeks to maximize sales:

(1) Price = H

(2) Output = G

(3) Total (economic) profit = F

Oligopoly would maximize sales where marginal cost = marginal revenue i.e. price will be point H, output G and market price F where the MC cuts demand will yield maximum economic profits