Question

 The blue curve on the following graph represents the demand curve facing a firm that can set its own prices.

 Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly.

 On the graph input tool, change the number found in the Quantity Demanded field to determine the prices that correspond to the production of 0, 10, 20, 25, 30, 40, and 50 units of output. Calculate the total revenue for each of these production levels. Then, on the following graph, use the green points (triangle symbol) to plot the results.

 Calculate the total revenue if the firm produces 10 versus 9 units. Then, calculate the marginal revenue of the 10th unit produced. The marginal revenue of the 10th unit produced is $

 Calculate the total revenue if the firm produces 20 versus 19 units. Then, calculate the marginal revenue of the 20th unit produced. The marginal revenue of the 20th unit produced is $

 Comparing your total revenue graph to your marginal revenue graph, you can see that when total revenue is increasing, marginal revenue is _______ 

Answer 1

Total revenue = Price (Quantity)

Price	Q	TR= P(Q)
250	0	0
200	10	2000
150	20	3000
125	25	3125
100	30	3000
50	40	2000
0	50	0

By plotting these points ,we get the total revenue curve (TR) as shown below :

Marginal revenue = (Change in TR/ change in Q)

Q	TR	MR=(change in TR/Change in Q)
10	2000	-
20	3000	100
30	3000	0
40	2000	-100
50	0	-200

The total revenue if the firm produces 10 units = (200)(10)=$ 2000 . And if the firm produces 9 units ,then TR= (205)(9)= $ 1845

This implies that the marginal revenue of the 10th unit produced is (2000-1845)= $ 155

The total revenue if the firm produces 20 units = (150)(20)= $ 3000. And if the firm produces 19 units ,then TR= (155)(19)=$ 2945

This implies that the marginal revenue of the 20th unit is (3000-2945)= $55.

Comparing TR to MR , we can see that total revenue is increasing ,when MR is decreasing but positive.