Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506725
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Question
Chapter 23, Problem 16CQ
(a)
To determine
The level of output that maximizes the profit of the firm.
(b)
To determine
The price charged by the firm.
(c)
To determine
Total revenue, cost, and profit of the firm.
(d)
To determine
Change over the time in the market.
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Use the table below to answer the following questions:
Quantity
Demand (Price)
Marginal Revenue
Marginal Cost
Average Cost
1
$1200
1200
500
500
2
1100
1000
275
388
3
1000
800
225
333
4
900
600
250
313
5
800
400
400
330
6
700
200
500
358
7
600
0
700
407
What is this firm’s profit-maximizing price? What is its profit-maximizing output?
What is the firm’s average profit? What is the firm’s total profit?
If at least one consumer is willing to pay $1200 for this product, why won’t the monopolist charge $1200?
Describe the difference between average revenue and marginal revenue. Why are both of these revenue measures important to a profit-maximizing firm?
Explain how a firm in a competitive market identifies the profit-maximizing level of production. When should the firm raise production, and when should the firm lower production?
Solve for the following questions:
a. what is the marginal revenue when the firm increases output from 4 to 5?
b. what is the marginal revenue when the firm increases the output from 5 to 6?
c. what is the marginal cost when the firm increases the output from 4 to 5?
Chapter 23 Solutions
Economics: Private and Public Choice (MindTap Course List)
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