In: Economics
a) Suppose that you learned the demand curve for your company's product is given by the following table:
Quantity Demanded (Units) |
Total Revenue (Dollars) |
12 | 120 |
13 | 130 |
14 | 140 |
15 | 150 |
16 | 160 |
Refer to Table 1. For your company, what is the average revenue and the marginal revenue when 14 units are produced and sold?
a. |
average revenue is $10, marginal revenue is $14. |
|
b. |
average revenue is $140, marginal revenue is $140. |
|
c. |
average revenue is $140, marginal revenue is $10. |
|
d. |
average revenue is $10, marginal revenue is $10. |
b) Continue from Table 1 in question (a), your company is MOST LIKELY to be in which type of market structure?
a. |
monopoly |
|
b. |
oligopoly |
|
c. |
perfect competition |
|
d. |
monopolistic competition |
Ans.a- (D)
Average revenue = Total revenue/ Quantity = 140/14 = 10
Marginal revenue = change in total revenue / change in quantity = (140-130)/(14-13) = 10
Ans.b- (C)
AR = MR is true only for perfectly competitive firm. Therefore, your company is most likely to be in perfectly competitive structure.