Question

In: Economics

Based on the information below, answer questions (a)-(g) Price (P) Quantity (Q) Revenue Marginal Revenue 20...

Based on the information below, answer questions (a)-(g)

Price (P)	Quantity (Q)	Revenue	Marginal Revenue
20	0
18	2
16	4
14	6
12	8
10	10
8	12
6	14
4	16
2	18
0	20

(a) Based on the information above write down the demand equation.

(b) Write down the marginal revenue equation.

(c) Given that the marginal cost is Q, what would be the profit maximizing level of Q?

(d) What would be the profit maximizing level of P?

(e) What would be the price elasticity at the profit maximizing P?

(f) What would be the maximized profit?

(g) Draw a well-labeled graph that shows your answers from questions (a)-(f).

Expert Solution

(a) The demand equation would be , which represents a standard linear equation supposing that P is on vertical axis and Q on horizontal axis. For Q=0, we have , meaning that a=20. The b is slope as or or . Hence, the demand equation would be or .

Under statistical procedure, we would have , , , and . By the OLS method, we would have , and .

(b) The MR equation can be derived from the demand equation. The total revenue would be or or . The MR would be or or .

(c) The profit maximizing level would be where the MC is equal to the MR, ie where or or or units.

(d) The corresponding profit maximizing level of P would be or or dollars.

(e) The price elasticity would be or or or . At the profit maximizing level, the elasticity would be or or .

(f) The cost would be or or , supposing no fixed cost. The profit would be or . At the profit maximizing level, we have or or or dollars.

(g) The graph and table would be as below. Note that .

P	Q	TR	MR
20	0	0	-
18	2	36	18
16	4	64	14
14	6	84	10
12	8	96	6
10	10	100	2
8	12	96	-2
6	14	84	-6
4	16	64	-10
2	18	36	-14
0	20	0	-18

Rahul Sunny answered 2 years ago

Use the following information to answer the questions below. Observation Price Quantity A $1.00 20 B...

Use the following information to answer the questions below. Observation Price Quantity A $1.00 20 B $2.00 15 1. Calculate a price elasticity of demand. You must show all your work to earn credit. 2. Given the elasticity of demand, a 10% increase in price will cause quantity demanded to fall by what percentage? Explain your answer. 3. Is this demand elastic or inelastic? Explain your answer. Part II Walmart advertises that it has rolled back prices. If Walmart is...

Suppose that a monopoly faces the demand, marginal revenue, and cost schedules below. Quantity Price Marginal...

Suppose that a monopoly faces the demand, marginal revenue, and cost schedules below. Quantity Price Marginal Revenue Marginal Cost Average Total Cost 1 230 230 100 150 2 210 190 100 125 3 190 150 100 116.6666667 4 170 110 100 112.5 5 150 70 100 110 6 130 30 100 108.3333333 7 110 -10 100 107.1428571 8 90 -50 100 106.25 9 70 -90 100 105.5555556 10 50 -130 100 105 What quantity maximizes profit? The monopoly Q =...

demand p=20-q total cost =20+q+q^2 find price ,quantity, and profit for a monoplist firm price ,quntitiy,...

demand p=20-q total cost =20+q+q^2 find price ,quantity, and profit for a monoplist firm price ,quntitiy, and profit for purely commpetitive firm

What is the marginal revenue (MR) and marginal cost (MC) as a function of Q? At what quantity is

The Company X has a monopoly on the beer market. Market demand is given by ?? = 200 - 4? and the company's short-term cost as a function of ? is given by ? (?) = ?2 + 40What is the marginal revenue (MR) and marginal cost (MC) as a function of Q? At what quantity is ?? = ???

Use the cost and revenue data to answer the questions. Quantity Price Total revenue Total cost...

Use the cost and revenue data to answer the questions. Quantity Price Total revenue Total cost 1010 9090 900900 675675 1515 8080 12001200 825825 2020 7070 14001400 10251025 2525 6060 15001500 12501250 3030 5050 15001500 15001500 3535 4040 14001400 18501850 If the firm is a monopoly, what is marginal revenue when quantity is 2525 ? MR = $ Not a valid number tools x10y What is marginal cost when quantity is 1515 ? MC = $ Not a valid number...

A profit-maximizing monopolist operates with an inverse demand curve P = 20 − Q and an associated marginal revenue MR = 20 − 2Q.

A profit-maximizing monopolist operates with an inverse demand curve P = 20 − Q and an associated marginal revenue MR = 20 − 2Q. Marginal cost of production is constant at MC = 4. Assume they have to sell each unit of output for the same price. a) Find the monopolist’s optimal choice of output and the socially efficient output. b) Sketch demand, marginal revenue, and marginal cost. Indicate on your diagram the points you found in part a)....

Suppose that the market demand is: P = 10 – Q, so that marginal revenue is:...

Suppose that the market demand is: P = 10 – Q, so that marginal revenue is: MR = 10 – 2Q. The marginal cost is: MC = 4 and average cost is: AC = 4. a. If the market structure is monopoly, determine the profit maximizing price and output for this monopolist and calculate its economic profit or loss at the profit maximizing output. b. If the market structure is perfect competition, determine the profit maximizing price and total output...

Complete the following cost and revenue schedule. Price Quantity Demanded Total Revenue Marginal Revenue Total...

Complete the following cost and revenue schedule. Price Quantity Demanded Total Revenue Marginal Revenue Total Cost Marginal Cost Average Total Cost 200 0 240 180 10 360 160 20 500 140 30 660 120 40 840 100 50 1040 80 60 1260 60 70 1500 40 80 1760 20 90 2040 a. At what rate of output are profits maximized within this range? b. What are total profits at that output rate?

A) If a firm is a price taker its marginal revenue is: Constant Decreasing as quantity...

A) If a firm is a price taker its marginal revenue is: Constant Decreasing as quantity produced increases Increasing as quantity produced increases Zero B) If a non-price taking firm produces where demand is inelastic, marginal revenue will be... positive zero negative imaginary C) For non-price taking firms-- which of the following statements are true. The firms markup depends on the elasticity of demand for the firms product. The firms marginal revenue decreases as output increases. The firm's...

Profit-maximizing Q (quantity) and P (price) will you get a different Q and P if you...

Profit-maximizing Q (quantity) and P (price) will you get a different Q and P if you use equations 2 and 4 vs. equations 2, 3, and 5? (1) Demand: Q = 230 – 2.5P + 4*Ps + .5*I, where Ps = 2.5, I = 20. (2) Inverse demand function [P=f(Q)], holding other factors (Ps = 2.5 and I =20) constant, is, P=100-.4*Q. (3) Production: Q = 1.2*L - .004L2 + 4*K - .002K2; (4) Long Run Total Cost: LRTC =...