Table 17-9Only two firms, Acme and Pinnacle, sell a particular product. The table below shows the demand curve for their product. Each firm has the same constant marginal cost of $10 and zero fixed cost. PriceQuantityTotal Revenues700065100650060200120005530016500504002000045500225004060024000357002450030800240002590022500201000200001511001650010120012000513006500014000 Refer to Table 17-9. If Acme and Pinnacle operate to jointly maximize profits and agree to share the profit equally, then how much profit will each of them earn?Group of answer choices$9,000$8,750$8,000$6,750

Given the table above, the marginal revenue needs to be found. Price Quantity Revenue Marginal revenue 70 0 0 65 100 6500 65 60 200 12000 55 55 300 16500 45 50 400 20000 35 45 500 22500 25 40 600 24000 15 35 700 24500 5 30 800 24000 -5 25 900 22500 -15 20 1000 20000 -25 15 1100 16500 -35 10 1200 12000 -45 5 1300 6500 -55 0 1400 0 -65Also, it is known that the marginal cost of each unit is $10. So the whole industry for simplicity could be considered as a single firm. Given this, assume that MC=10 for the whole industry. Now the profit-maximizing condition is given as MC=MR. Here at the price of $40, the marginal revenue is 15, after which it is less than MC. So the firm would produce at this level. This is because, after this, the additional revenue would be less than the additional cost per unit of output. Hence the optimal revenue would be $24000. At this level, the quantity produced is 600. Also, the marginal cost is $10. So the total cost is 600*10=$6000 Profit of whole industry= Revenue- cost = $24000-$6000 =$18000 Now that the two firms jointly have $18000 as profit, each firm would have half the profit ie 18000/2=$9000. Hence the answer is option A)$9000

Answered: Only two firms, Acme and Pinnacle, sell…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Table 17-9
Only two firms, Acme and Pinnacle, sell a particular product. The table below shows the demand curve for their product. Each firm has the same constant marginal cost of $10 and zero fixed cost.

Price	Quantity	Total Revenues
70	0	0
65	100	6500
60	200	12000
55	300	16500
50	400	20000
45	500	22500
40	600	24000
35	700	24500
30	800	24000
25	900	22500
20	1000	20000
15	1100	16500
10	1200	12000
5	1300	6500
0	1400	0

Refer to Table 17-9. If Acme and Pinnacle operate to jointly maximize profits and agree to share the profit equally, then how much profit will each of them earn?

Group of answer choices

$9,000

$8,750

$8,000

$6,750

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