We are asked what is the range of market prices that would assure that the firm would produce exactly 6 generalizations. All we need to do is remember how profit maximizing behavior works. For the firm to produce exactly 6 generalizations means the price must be at least as high as the MC for the 6th unit but not as high as the 7th. As we see below, the MC of the 6th is $35. If the price were any lower the firm wouldn't produce a 6th unit. The MC for the 7th is $40 so the firm would produce 7 units if the price were $40, so the answer is between $35 and $40.

GROSS GENERALIZATIONS
Output Total Cost Marginal Cost
0 25.00 -
1 35.00 10
2 50.00 15
3 70.00 20
4 95.00 25
5 125.00 30
6 160.00 35
7 200.00 40
21. Again referring to the data given in the table above, what is the range of market prices for generalizations that will induce Gross to produce exactly 6 generalizations?
  1. between $26.66 and $33.33. If the price were between $26.66 and $30 the firm would produce 4 units, if it were between $30.00 and $33.33 it would produce 5.
  2. between $26.66 and $28.57. If the price were between $26.66 and $30 the firm would produce 4 units.
  3. between $30 and $35. If the price were between $30 and $35 the firm would produce 5 units
  4. between $35 and $40.
  5. between $160 and $200. If the price were between $160 and $200 the firm would produce a hell of a lot more than 6 or even 7 units.
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