Essentials of Economics (MindTap Course List)
8th Edition
ISBN: 9781337091992
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 14, Problem 8PA
Subpart (a):
To determine
Profit maximization.
Subpart (b):
To determine
The demand, marginal revenue and marginal cost curves.
Subpart (c):
To determine
Evaluate the shortage.
Subpart (d):
To determine
Evaluate shortage.
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Your business, which has some market power, has the following demand (D), marginal revenue (MR), marginal cost (MC), and average cost (AC) curves. Move point E to label the profit-maximizing price and quantity for your firm.
If the goal of your business is to maximize profit, how much will it produce, and what price will it charge?
-The business will exit the market because it is unable to cover its average costs.
-The business will produce 40 units, and charge a price of $5.
-The business will produce 30 units, and charge a price of $3.
-The business will produce 30 units, and charge a price of $6.
Why is the level of output at which marginal revenue equals marginal cost the profit-maximizing output?
Henry Potter owns the only well in town that produces clean drinking water. He faces the following demand, marginal revenue, and marginal cost curves:
Demand:
P=60−QP=60−Q
Marginal Revenue:
MR=60−2QMR=60−2Q
Marginal Cost:
MC=QMC=Q
On the following graph, use the blue line (circle symbol) to graph Mr. Potter's demand curve. Then, use the black line (cross symbol) to graph his marginal revenue (MR) curve. Next, use the orange line (square symbol) to graph his marginal cost (MC) curve. Finally, use the grey point (star symbol) to indicate the profit-maximizing price and quantity.
:
The profit-maximizing quantity is___units, and the profit-maximizing price is___.
Mayor George Bailey, concerned about water consumers, is considering a price ceiling that is 10% below the monopoly price.
At this new price, the quantity demanded would be___units.
At this quantity, the marginal cost would be___the price. Therefore, the profit-maximizing Mr. Potter___produce…
Chapter 14 Solutions
Essentials of Economics (MindTap Course List)
Ch. 14.1 - Prob. 1QQCh. 14.2 - Prob. 2QQCh. 14.3 - Prob. 3QQCh. 14.4 - Prob. 4QQCh. 14.5 - Prob. 5QQCh. 14 - Prob. 1CQQCh. 14 - Prob. 2CQQCh. 14 - Prob. 3CQQCh. 14 - Prob. 4CQQCh. 14 - Prob. 5CQQ
Ch. 14 - Prob. 6CQQCh. 14 - Prob. 1QRCh. 14 - Prob. 2QRCh. 14 - Prob. 3QRCh. 14 - Prob. 4QRCh. 14 - Prob. 5QRCh. 14 - Prob. 6QRCh. 14 - Prob. 7QRCh. 14 - Prob. 8QRCh. 14 - Prob. 1PACh. 14 - Prob. 2PACh. 14 - Prob. 3PACh. 14 - Prob. 4PACh. 14 - Prob. 5PACh. 14 - Prob. 6PACh. 14 - Prob. 7PACh. 14 - Prob. 8PACh. 14 - Prob. 9PACh. 14 - Prob. 10PACh. 14 - Prob. 11PACh. 14 - Prob. 12PA
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