2. Calculating marginal revenue from a linear demand curve 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. Graph Input Tool (?) Market for Goods 200 180 IQuantity 20 Demanded (Units) 160 Demand Price (Dollars per unit) 140 100.00 9 120 100 80 60 Demand 40 20 8 12 16 20 24 28 32 36 40 QUANTITY (Units) 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, 8, 16, 20, 24, 32, and 40 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. 2000 1800 Total Revenue 1600 1400 1200 1000 800 600 400 200 4 8 12 16 20 24 28 32 36 40 QUANTITY (Number of units) TOTAL REVENUE (Dollars) PRICE (Dollars per unit)
2. Calculating marginal revenue from a linear demand curve 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. Graph Input Tool (?) Market for Goods 200 180 IQuantity 20 Demanded (Units) 160 Demand Price (Dollars per unit) 140 100.00 9 120 100 80 60 Demand 40 20 8 12 16 20 24 28 32 36 40 QUANTITY (Units) 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, 8, 16, 20, 24, 32, and 40 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. 2000 1800 Total Revenue 1600 1400 1200 1000 800 600 400 200 4 8 12 16 20 24 28 32 36 40 QUANTITY (Number of units) TOTAL REVENUE (Dollars) PRICE (Dollars per unit)
Chapter8: Perfect Competition
Section: Chapter Questions
Problem 7.15P
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Transcribed Image Text:2. Calculating marginal revenue from a linear demand curve
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.
Graph Input Tool
(?)
Market for Goods
200
180
IQuantity
20
Demanded
(Units)
160
Demand Price
(Dollars per unit)
140
100.00
9 120
100
80
60
Demand
40
20
8
12
16
20
24 28 32
36
40
QUANTITY (Units)
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, 8,
16, 20, 24, 32, and 40 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.
2000
1800
Total Revenue
1600
1400
1200
1000
800
600
400
200
4
8
12
16
20
24
28
32
36
40
QUANTITY (Number of units)
TOTAL REVENUE (Dollars)
PRICE (Dollars per unit)
Transcribed Image Text:Calculate the total revenue if the firm produces 8 versus 7 units. Then, calculate the marginal revenue of the eighth unit produced.
The marginal revenue of the eighth unit produced is S
Calculate the total revenue if the firm produces 16 versus 15 units. Then, calculate the marginal revenue of the 16th unit produced.
The marginal revenue of the 16th unit produced is S
Based on your answers from the previous question, and assuming that the marginal revenue curve is a straight line, use the black line (plus symbol)
to plot the firm's marginal revenue curve on the following graph. (Round all values to the nearest increment of 40.)
200
160
Marginal Revenue
120
80
40
-40
4
8
12
16
20
24
28
32
36
40
QUANTITY (Units)
Comparing your total revenue graph to your marginal revenue graph, you can see that when total revenue is decreasing, marginal revenue is
MARGINAL REVENUE (Dollars)
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