Pearson eText Microeconomics -- Access Card
7th Edition
ISBN: 9780136850045
Author: Hubbard, Glenn, O'Brien, Anthony
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 12, Problem 12.2.5PA
To determine
Why firms do not maximize revenue rather than profit.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Briefly explain using a graph whether given statement is true or false. ‘To maximise profit, a firm should produce the quantity where the difference between marginal revenue and marginal cost is the greatest. If a firm produces more than this quantity, then the profit made on each additional unit will be falling.’
The firm depicted by the graph below is producing q0 level of output. Given its costs, is the firm producing at the profit-maximizing/loss minimizing level of output? Briefly explain why or why not.
The following is a quote from a New York Times article: “If a company makes product donations to the school- computers for instance- then the image of a company goes up as graduate students use the company’s products.” Does such action square with a company’s objective of profit maximization? Discuss and cite one company that makes product donations and how does it help the image of the company
Chapter 12 Solutions
Pearson eText Microeconomics -- Access Card
Ch. 12 - Prob. 12.1.1RQCh. 12 - Prob. 12.1.2RQCh. 12 - Prob. 12.1.3RQCh. 12 - Prob. 12.1.4PACh. 12 - Prob. 12.1.5PACh. 12 - Prob. 12.1.6PACh. 12 - Prob. 12.1.7PACh. 12 - Prob. 12.1.8PACh. 12 - Prob. 12.1.9PACh. 12 - Prob. 12.2.1RQ
Ch. 12 - Prob. 12.2.2RQCh. 12 - Prob. 12.2.3RQCh. 12 - Prob. 12.2.4PACh. 12 - Prob. 12.2.5PACh. 12 - Prob. 12.2.6PACh. 12 - Prob. 12.2.7PACh. 12 - Prob. 12.2.8PACh. 12 - Prob. 12.3.1RQCh. 12 - Prob. 12.3.2RQCh. 12 - Prob. 12.3.3PACh. 12 - Prob. 12.3.4PACh. 12 - Prob. 12.3.5PACh. 12 - Prob. 12.3.6PACh. 12 - Prob. 12.3.7PACh. 12 - Prob. 12.3.8PACh. 12 - Prob. 12.4.1RQCh. 12 - Prob. 12.4.2RQCh. 12 - Prob. 12.4.3RQCh. 12 - Prob. 12.4.4PACh. 12 - Prob. 12.4.5PACh. 12 - Prob. 12.4.6PACh. 12 - Prob. 12.4.7PACh. 12 - Prob. 12.4.8PACh. 12 - Prob. 12.4.9PACh. 12 - Prob. 12.4.10PACh. 12 - Prob. 12.5.1RQCh. 12 - Prob. 12.5.2RQCh. 12 - Prob. 12.5.3RQCh. 12 - Prob. 12.5.4PACh. 12 - Prob. 12.5.5PACh. 12 - Prob. 12.5.6PACh. 12 - Prob. 12.5.8PACh. 12 - Prob. 12.5.9PACh. 12 - Prob. 12.5.10PACh. 12 - Prob. 12.5.11PACh. 12 - Prob. 12.5.12PACh. 12 - Prob. 12.6.1RQCh. 12 - Prob. 12.6.2RQCh. 12 - Prob. 12.6.3RQCh. 12 - Prob. 12.6.4PACh. 12 - Prob. 12.6.5PACh. 12 - Prob. 12.6.6PACh. 12 - Prob. 12.6.7PACh. 12 - Prob. 12.6.8PACh. 12 - Prob. 12.6.9PACh. 12 - Prob. 12.6.10PACh. 12 - Prob. 12.1CTECh. 12 - Prob. 12.2CTECh. 12 - Prob. 12.3CTE
Knowledge Booster
Similar questions
- Suppose Musashi runs a small business that manufactures shirts. Assume that the market for shirts is a competitive market, and the market price is $25 per shirt. The following graph shows Musashi's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for shirts quantities zero through seven (inclusive) that Musashi produces. 200 175 Total Revenue 150 Total Cost 125 Profit 100 75 50 25 -25 1 2 3 7 QUANTITY (Shirts) TOTAL COST AND REVENUE (Dollars) coarrow_forwardSuppose Becky runs a small business that manufactures shirts. Assume that the market for shirts is a competitive market, and the market price is $20 per shirt. The following graph shows Becky's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for the first seven shirts that Becky produces, including zero shirts. 200 175 Total Revenue 150 Total Cost 125 Profit 100 75 -25 1 2. 4 6. 7 QUANTITY (Shirts) TOTAL COST AND REVENUE (Dollars) 25arrow_forwardQuestions 1-3 use the following case to determine a way to take a single product, like toilet and bundle it in such a way as to extract all of the profit at the time of the initial sale. You go to CostCo or Walmart and you see paper towel sold in a bundle and you wonder how the retailer can make any money. You do a little research and you find that the demand for paper towels is depicted by the following demand curve and marginal cost: P=$2.20 (1/10)*Q MR-$2.20 (2/10)*Q MC 0.20 where P is the price of paper towels, MC is the marginal cost of paper towels, MR is the marginal revenue of paper towels and Q is the quantity of paper towels. So you decide to try two different pricing strategies: 1) sell one roll at a time and 2) use multipart pricing to sell a bundle. Given the results for the pricing strategies in problems 1 and 2, what is your pricing decision and why?arrow_forward
- Suppose, you're going to open a new fast food business. Briefly discuss the factors that would possibly affect your fast food business's pricing decisions.arrow_forward11. Profit maximization using total cost and total revenue curves Suppose Hubert runs a small business that manufactures teddy bears. Assume that the market for teddy bears is a competitive market, and the market price is $20 per teddy bear. The following graph shows Hubert's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for teddy bears quantities zero through seven (inclusive) that Hubert produces. 200 175 Total Revenue 150 125 Total Cost Profit 100 75 50 25 -25 3 QUANTITY (Teddy bears) 1 2 5 7 8 TOTAL COST AND REVENUE (Dollars)arrow_forwardBriefly explain the condition when firm decide to leave (exit) the marketarrow_forward
- Suppose Eileen runs a small business that manufactures shirts. Assume that the market for shirts is a competitive market, and the market price is $20 per shirt. The following graph shows Eileen's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for shirts quantities zero through seven (inclusive) that Eileen produces. 200 175 Total Revenue 150 125 Total Cost Profit 100 50 25 -25 1 3 4 6 7 QUANTITY (Shirts) Calculate Eileen's marginal revenue and marginal cost for the first seven shirts she produces, and plot them on the following graph. Use the blue points (circle symbol) to plot marginal revenue and the orange points (square symbol) to plot marginal cost at each quantity. (?) 40 Marginal Revenue Marginal Cost 1. 5 6 7 8 QUANTITY (Shirts) Eileen's profit is maximized when she produces shirts. When she does this, the marginal cost of the last shirt she produces is $ which is v than the price Eileen receives…arrow_forwardUse the graph above to answer these questions: What is the profit-maximizing level of output? What is the economic profit? What is the per-unit amount of profit at the profit-maximizing level of output?arrow_forward3. Profit maximization using total cost and total revenue curves Suppose Simone runs a small business that manufactures teddy bears. Assume that the market for teddy bears is a competitive market, and the market price is $20 per teddy bear. The following graph shows Simone's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for the first seven teddy bears that Simone produces, including zero teddy bears. 200 175 Total Revenue 150 125 Total Cost Profit 100 75 50 25 -25 1 3 4 7 8 QUANTITY (Teddy bears) TOTAL COST AND REVENUE (Dollars)arrow_forward
- Suppose that the market for cashmere sweaters is a competitive market. The following graph shows the daily cost curves of a firm operating in this market. Hint: After placing the rectangle on the graph, you can select an endpoint to see the coordinates of that point. 100 90 Profit or Loss 80 70 60 40 ATC 30 20 MC AVC 10 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of sweaters per day) In the short run, at a market price of $45 per sweater, this firm will choose to produce 45,000 sweaters per day. On the preceding graph, use the blue rectangle (circle symbols) to shade the area representing the firm's profit or loss if the market price is $45 and the firm chooses to produce the quantity you already selected. Note: In the following question, enter a positive number, even if it represents a loss. The area of this rectangle indicates that the firm's would be thousand per day in the short run. PRICE (Dollars per sweater)arrow_forwardSuppose Eleanor runs a small business that manufactures teddy bears. Assume that the market for teddy bears is a competitive market, and the market price is $20 per teddy bear. The following graph shows Eleanor's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for teddy bears quantities zero through seven (inclusive) that Eleanor produces. 200 175 Total Revenue 150 Total Cost 125 Profit 100 75 50 25 -25 1 2 3 7 8 QUANTITY (Teddy bears) TOTAL COST AND REVENUE (Dollars)arrow_forwardext pages In the following graph, indicate the area representing the Red Robin restaurant's profit when the demand curve is D, and the area representing its loss when the demand curve is D2. 1.) Using the rectangle drawing tool, shade in Red Robin's profit when demand is D₁. Label your area 'Profit.' 2.) Using the rectangle drawing tool, shade in Red Robin's loss when demand is D2. Label your area 'Loss.' Carefully follow the instructions above and only draw the required objects. Grapher MacBook Air Price (dollars per hamburger) MC ATC Q MR2 MR₁ Quantity (hamburgers per week) D2 D1 Clear all Check answerarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Microeconomics: Principles & PolicyEconomicsISBN:9781337794992Author:William J. Baumol, Alan S. Blinder, John L. SolowPublisher:Cengage LearningEconomics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Microeconomics: Principles & Policy
Economics
ISBN:9781337794992
Author:William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning