LMNOP, Inc is a firm in a perfectly competitive market that produces cell phone charging cables. Every time it sells a cell phone charging cable, its total revenue increases by $\$ 7$. The marginal cost (MC) of producing different quantities of cables is given in the table below:
\begin{tabular}{ll}
$Q$ & $M C(Q)$ \
\hline 0 & - \
100 & $\$ 2$ \
200 & $\$ 1$ \
300 & $\$ 3$ \
400 & $\$ 5$ \
500 & $\$ 7$ \
600 & $\$ 9$ \
700 & $\$ 11$
\end{tabular}

What is the marginal cost of the profit-maximizing quantity?
Choose 1 answer:
(A) $\$ 9$
(B) $\$ 7$
(C) $\$ 5$
(D) $\$ 11$
(E) $\$ 1$

Question

LMNOP, Inc is a firm in a perfectly competitive market that produces cell phone charging cables. Every time it sells a cell phone charging cable, its total revenue increases by $\$ 7$. The marginal cost (MC) of producing different quantities of cables is given in the table below:
\begin{tabular}{ll}
$Q$ & $M C(Q)$ \
\hline 0 & - \
100 & $\$ 2$ \
200 & $\$ 1$ \
300 & $\$ 3$ \
400 & $\$ 5$ \
500 & $\$ 7$ \
600 & $\$ 9$ \
700 & $\$ 11$
\end{tabular}

What is the marginal cost of the profit-maximizing quantity?
Choose 1 answer:
(A) $\$ 9$
(B) $\$ 7$
(C) $\$ 5$
(D) $\$ 11$
(E) $\$ 1$

Accepted Answer

∻Solution∻ ‖ a ⋮ Definition of Marginal Cost: The marginal cost (MC) is the additional cost incurred by producing one more unit of a good. In a perfectly competitive market, a firm maximizes profit where marginal cost equals marginal revenue (MR). ‖‖ b ⋮ Marginal Revenue: Given that the total revenue increases by $7 for each additional unit sold, the marginal revenue (MR) is $7. ‖‖ c ⋮ Profit Maximization Condition: In a perfectly competitive market, the profit-maximizing quantity is where $MC = MR$. Therefore, we need to find the quantity where $MC(Q) = 7$. ‖‖ d ⋮ Table Analysis: From the table, we see that $MC(Q) = 7$ when $Q = 500$. ‖ ∻Answer∻ ⚹ $7 ⚹ ∻Key Concept∻ ⚹ Marginal Cost and Marginal Revenue in Perfect Competition ⚹ ∻Explanation∻ ⚹ In a perfectly competitive market, a firm maximizes profit where marginal cost equals marginal revenue. Given that the marginal revenue is $7, the profit-maximizing quantity is where the marginal cost is also $7, which corresponds to a quantity of 500 units. ⚹◊What is the formula to calculate total revenue?⍭ Generate me a similar question◊

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