Refer to Scenario 10.2. Suppose that in addition to the tax, a business license is required to stay in business. The license costs $1000. What is the profit maximizing level of output?

A) 0
B) 90
C) 95
D) 100
E) none of the above

Question

Abdullah Hasan · Accepted Answer

Final Answer : B, Explanation :  To find the profit-maximizing level of output, we set marginal revenue (MR) equal to marginal cost (MC). From the given equations, MR = 100 - Q and MC = 5. Setting MR = MC gives 100 - Q = 5, solving for Q gives Q = 95. However, the question asks for the profit-maximizing level of output considering an additional fixed cost (the business license fee of $1000). Fixed costs do not affect the profit-maximizing level of output because they do not change with the quantity of output produced. Therefore, the profit-maximizing level of output remains at 95 units (option C), not option B as initially indicated. This correction addresses the mistake in the selection process.

Refer to Scenario 10.2. Suppose that in addition to the tax, a business license is required to stay in business. The license costs $1000. What is the profit maximizing level of output?

A) 0
B) 90
C) 95
D) 100
E) none of the above

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Learning Objectives

Learning Objectives

Related questions

Refer to Scenario 10.2. Suppose that in addition to the tax, a business license is required to stay in business. The license costs $1000. What is the profit maximizing level of output?A) 0B) 90C) 95D) 100E) none of the above

Definitions

Learning Objectives

Learning Objectives

Related questions

Refer to Scenario 10.2. Suppose that in addition to the tax, a business license is required to stay in business. The license costs $1000. What is the profit maximizing level of output?

A) 0
B) 90
C) 95
D) 100
E) none of the above