Question
In: Economics
Define total revenue, marginal revenue, and average revenue. Discuss why the demand curve is represented by...
Define total revenue, marginal revenue, and average revenue. Discuss why the demand curve is represented by the marginal revenue curve for a perfectly competitive firm
Solutions
Expert Solution
a) Total revenue is total quantity sold at the given price. For example, if the price of a good is $10 and at that price total quantity sold is 100. The total revenue of the firm will be $10 x 100 = $1000.
b) Marginal revenue is the revenue earned by selling an extra unit. For example, If the firm mentioned above is selling 101 units at the same price. The extra revenue the firm earned by selling an extra unit is the marginal revenue. Here, it is $10.
c) Average revenue is total revenue divided by the total quantity sold. Using the same example, when 100 units were sold total revenue was $1000. Average revenue will be $1000 /100 = $10.
d) IN a perfectly competitive market the Marginal revenue curve represents the demand curve because the firm can sell as many units they want at the given price. The curve is perfectly elastic and the firm is a price taker so they match the good sold with the extra revenue earned by selling that unit. making the demand of the good and the revenue earned by the good same.
Rahul Sunny answered 2 years agoRelated Solutions
A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost...
A monopolist faces the following demand curve, marginal revenue
curve, total cost curve and marginal cost curve for its
product:
Q = 200 - 2P MR = 100 - Q TC = 5Q MC = 5
a) suppose that a tax of $5 for each unit produced is imposed by
state government. What is the profit maximizing level of
output?
b) suppose that a tax of $5 for each unit produced is imposed by
state government. What is the price...
A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost...
A monopolist faces the following demand curve, marginal revenue
curve, total cost curve and marginal cost curve for its product: Q
= 200 ; MR = 100-Q ; TC = 5Q ; MC = 5
a) Suppose that a tax of $5 for each unit produced is imposed by
state government. What is the profit maximizing level of
output?
b) Suppose that a tax of $5 for each unit produced is imposed by
state government. What is the profit maximizing...
A monopolist faces the following demand curve, marginal revenue, total cost curve and marginal cost curve...
A monopolist faces the following demand curve, marginal revenue,
total cost curve and marginal cost curve for its product: Q = 200 -
2P ; MR = 100 - Q ; TC = 5Q ; MC = 5
a) What level of output maximizes total revenue?. b) What is the
profit maximizing level of output?. c) What is the profit
maximizing price?. d) How much profit does the monopolist earn? e)
Suppose that a tax of $5 for each unit...
A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost...
A monopolist faces the following demand curve, marginal revenue
curve, total cost curve and marginal cost curve for its product: Q
= 200 - 2P MR = 100 - Q TC = 5Q MC = 5 a. What is the profit
maximizing level of output? (10 pts.) b. What is the profit
maximizing price? (8 pts.) c. How much profit does the monopolist
earn? (10 pts.)Immersive Reader (28 Points)
Why does the average revenue and marginal revenue curve seperate for a monopolist.
Why
does the average revenue and marginal revenue curve seperate for a
monopolist.
Define and explain the relationship between total revenue, average revenue, and marginal revenue for a monopolist....
Define and explain the relationship between total revenue,
average revenue, and marginal revenue for a monopolist. What is
monopoly profit? Should a monopolist produce quantities of product
greater than that which would maximize profits?
In using the graph for a monopolist, with demand, marginal revenue, marginal cost, and average total...
In using the graph for a monopolist, with demand, marginal
revenue, marginal cost, and average total cost curves, explain how
you find the profit maximizing level of output. (Note that this
question asks about OUTPUT. The next question asks about
PRICE.)
Profits are maximized at the quatnity where total revenue is
highest above total cost
Profits are maximized at the quantity where ATC hits its
minimum
Profits are maximized at the quantity where marginal revenue
equals marginal cost
Profits are...
A. draw a graph showing the marginal cost, average total cost, demand, marginal revenue, and average...
A. draw a graph showing the marginal cost, average total cost,
demand, marginal revenue, and average revenue for a perfectly
competitive firm. Indicate the level of profit where profit is
maximized, shade in the area of maximum profit, give the amount of
maximum profit, and explain how this number is calculated.
B.Graph the short-run supply curve for a perfectly competitive
firm and explain where this short-run supply curve lies. Indicate
the following curves on your graph: marginal cost curve, marginal...
Problem 1: A monopolist faces the following demand curve, marginal revenue curve, total cost curve and...
Problem 1: A monopolist faces the following demand curve,
marginal revenue curve, total cost curve and marginal cost curve
for its product: Market demand function: Q = 200 - 2P (direct form,
which shows Q as a function of P) Market demand function in the
indirect form: P = 100 – 0.5Q (indirect form because it shows P as
a function of Q). Marginal revenue function: MR = 100 – Q (Notice
that the slope of the MR function is...
3. James is a producer in a monopoly industry. His demand curve, total revenue, curve, marginal...
3. James is a producer in a monopoly industry. His demand curve,
total revenue, curve, marginal revenue curve and total cost curve
are given as follows:
Q=100-4P
TR=25Q-0.25Q2
MR=25-0.5Q
TC=6Q
MC=6
a.How much output will James produce?
b. What price will James charge per unit of output?
c. How much profit will James make?
d. If this was a competitive firm. Calculate the profit
maximizing price and quantity and compare with price and quantity
under monopoly.
e. Calculate the amount...
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