Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN: 9781305506381
Author: James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher: Cengage Learning
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Chapter B, Problem 6E
a.
To determine
To evaluate the marginal revenue and marginal cost functions by using the demand functions from exercise 5.
b.
To determine
To evaluate theMarginal revenue equals marginal cost and the economic principle that profits are maximized at the output level where marginal revenue equals marginal cost is illustrated.
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Consider the following price-demand function:
P = 80 − 4Q, {Q/0 ≤ Q ≤ 10}
(i) Sketch the price-demand function(ii) Find the revenue function.(iii) Suppose C = 20 + 5Q , find the profit function(iv) Calculate the profit if Q=8(v) Find the break-even level of output
You have to solve iv and v
Refer to the diagram above. Which of the following explains the slope of the total revenue curve illustrated in this graph?
Question 1 options:
total revenue is shown as a straight line sloping up indicaates a perfectly competitive firm.
the slope of the total revenue curve is determined by the price of the goods produced.
at higher levels of output, diminishing returns will cause the total cost to slope downward steeply.
the slope of the total revenue curve is explained by both of the first two statements above.
Firm A and Firm B sell identical goods
The total market demand is:Q(P) = 1,000-1.0P
The inverse demand function is therefore: P(QM) = 10,000-10QM
QM is total market production (i.e., combined production of firm’s A and B). That is: QM = QA + QB
As a result, the inverse demand curve for each firm is: P(QA,QB) = 10,000-10QA-10QB
The difference between this example and the example in class is that the two firms have different costs. Firm A has the same cost as in class, but firm B has a different cost function:
TCA(QA) = 5000QA
TCB(QB) = 5000QB
Using the demand function and the cost functions above, what is firm A’s profit function?
Using the profit function above and assuming that firm B produces QB, calculate what firm A’s best response is to firm B’s decision to produce QB. (Note: Firm A’s best response should be a function of QB)
Using the demand function and the cost functions above, what is firm B’s profit function?
Using the profit function above and assuming that firm A…
Chapter B Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
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