Answer:
(a) Output = 6 units, Price = $22
(b) Total Profit = $64
Explanation:
We can use the given demand and cost data to calculate the missing values for Total Revenue, Marginal Revenue, and Marginal Cost at each Quantity level.
- To calculate Total Revenue (TR), multiply the Quantity (Q) by the Price (P).
- To calculate Marginal Revenue (MR), find the change in Total Revenue (TR) when the Quantity (Q) increases by one unit.
- To calculate Marginal Cost (MC), find the change in Total Cost (TC) when the Quantity (Q) increases by one unit.
See the attachment for the completed table.
Part (a)
To determine the output and price that the monopolistically competitive firm will produce, we need to identify the point where Marginal Revenue (MR) equals Marginal Cost (MC), as this is the profit-maximizing level of output.
From the completed table, we can see that MR and MC are equal at Quantity (Q) = 6:
MR(Q=6) = $12
MC(Q=6) = $12
So, the monopolistically competitive firm will produce 6 units of output, and the corresponding price will be $22.
Part (b)
To calculate the total profit at the profit-maximizing level of output (Q=6), use the formula:
Total Profit = Total Revenue - Total Cost
Therefore:
Total Profit = TR(Q=6) - TC(Q=6)
Total Profit = $132 - $68
Total Profit = $64
So, the monopolistically competitive firm will receive a total profit of $64 at the profit-maximizing level of output (6 units).