Marginal revenue curve.
Explanation of Solution
Marginal revenue curve and profit maximizing level of price and quantity are shown in a figure.
Figure 1 shows profit maximizing price, quantity and
In figure 1, the vertical axis measure price and horizontal axis measure quantity. The downward sloping curve “D” is the demand curve and downward sloping curve “MR” is the marginal revenue curve. “P” is the profit maximizing price and “Q” is the profit maximizing quantity. The profit earned is shown in dark shaded rectangle in the figure. Deadweight loss created is shown in the light shaded triangle “abc”. The deadweight loss is the decrease in the total surplus caused by markets distortions or market inefficiency. The profit earned is shown in dark shaded rectangle in the figure.
Concept introduction:
Marginal revenue curve: Marginal revenue curve shows the additional revenue that will be generated by increasing product sales by one unit.
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Chapter 13 Solutions
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