Question

George has the following demand curve for selling vegemite: Table 1 Price. Quantity

$10.00. 1
$8.00 2
$6.00 3
$4.00 4
$2.00 5

In addition, George has a marginal cost of $3.00 per unit.
a) Refer to Table 1. What is George's profit-maximizing level of output?
b) Refer to Table 1. What is George's profit-maximizing price?

Answer 1

George's profit-maximizing level of output is 4 units and his profit-maximizing price is $4.00.

Step-by-step explanation:

The profit-maximizing level of output for George can be determined by finding the quantity at which the marginal cost equals the market price. In this case, the marginal cost is $3.00 per unit. Looking at the table, we can see that at a price of $4.00, the quantity is 4 units. Therefore, George's profit-maximizing level of output is 4 units.

The profit-maximizing price can be determined by finding the price at which the demand equals the quantity determined in the previous step. Looking at the table, we can see that at a quantity of 4 units, the price is $4.00. Therefore, George's profit-maximizing price is $4.00.