Question

A monopolistically competitive firm faces the following demand schedule for its product. In addition, the firm...

A monopolistically competitive firm faces the following demand schedule for its product. In addition, the firm has total fixed costs equal to 20.

Price (dollars)

Quantity

30

1

26

2

22

3

21.4

4

14

5

10

6

6

7

If the firm has a constant marginal cost of $7 per unit, what profits will the firm earn at the profit-maximizing level of output?

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Answer #1

The profit-maximizing quantity is 4. The profit at this quantity is $37.6. The calculations are provided in the images attached.

B с E F G H D MC per unit $20 $7 A 1 Fixed Cost(FC) 2 3 Quantity 4 Price FC 1 20 VC(MC*Q) TOTAL COST(TC) PROFIT(TR-TC) 7 27 3

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