Chapter 12R, Problem 7MCQ

To determine

The correct option for reason where firm can generate equal revenue if it produces half of quantity demanded.

Answer to Problem 7MCQ

Option d is correct.

Explanation of Solution

Explanation for correct option:

d.

Given Information:

Price (per pound)	Quantity in million of pound	Revenue generated
$6	0	$0
$5	10	$50
$4	20	$80
$3	30	$90
$2	40	$80
$1	50	$50
$0	60	$0

The revenue generated will be maximum if quantity of 30 million is produced at price $3 per pound. The revenue will be shared equally i.e. $45 by each firm. Therefore, option d is the only correct option.

Explanation for incorrect options:

Since, the question is numerical based, the explanation for incorrect option is invalid.

Economics Concept Introduction

Oligopoly market structure: Market structure where there are few firms selling differentiated products. There are certain barriers to entry and exit which do not allow firms to enter the market easily.