Questions: ABC Audio Company is in a monopolistically competitive market selling headphones. In order to determine the quantity and price at which profit will be maximized, data was collected and used to produce the curves shown in the figure below. What is the profit-maximizing price?

ABC Audio Company is in a monopolistically competitive market selling headphones. In order to determine the quantity and price at which profit will be maximized, data was collected and used to produce the curves shown in the figure below. What is the profit-maximizing price?
Transcript text: ABC Audio Company is in a monopolistically competitive market selling headphones. In order to determine the quantity and price at which profit will be maximized, data was collected and used to produce the curves shown in the figure below. What is the profit-maximizing price?
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Solution

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Solution Steps

Step 1: Find the profit-maximizing quantity

The profit-maximizing quantity is where Marginal Revenue (MR) equals Marginal Cost (MC). The two curves intersect at a quantity of 6.

Step 2: Find the corresponding price on the demand curve

At a quantity of 6, the corresponding price on the demand curve is $23.

Final Answer: The profit-maximizing price is $23.

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