Question

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
18.95	4
14	5
10	6
6	7

If the firm has a constant marginal cost of $7 per unit, what is the level of output that maximizes profits?

Answer 1

MR 20 20 ) 2 18.45 " 14 annoner 3 TA 30 52 66 7508 70 60 42 22 14 9.8 -5.8 -10 -18 10 6 7 M) С as - 7 so profit Profit maximis maximising when Quantity is MR IMC But at Quantity & MR Ties close to MC Hinta Also, MR Z MC so Profit fit maximisin imising output will be 4 units