Economics and Marginal Revenue
Ariel Conway
Student ID #: A08012684
South-9:30-ECO 2023
Problem #4
25-1
Suppose that it is the year 2038. Exclusive ownership of a resource found to be required for the production of fusion power has given a firm monopoly power in the provision of this good. What is true of the relationship between the price of this resource and the marginal revenue the firm receives?
25-1 (a)
The demand curve faced by the firm is the downward-sloping market demand curve, so price exceeds marginal revenue at all quantities beyond the first unit produced.
25-3
The following table depicts the daily output, price, and costs of a monopoly dry cleaner located near the campus of a remote college town. a. Compute the revenues and profits at each output rate. b. What is the profit-maximizing rate of output?
25-3 (a) (1)Output (suits cleaned) | (2)Price per Suit | (3)Total Costs | 0 | 8.00 | 3.00 | 1 | 7.50 | 6.00 | 2 | 7.00 | 8.50 | 3 | 6.50 | 10.50 | 4 | 6.00 | 11.50 | 5 | 5.50 | 13.50 | 6 | 5.00 | 16.00 | 7 | 4.50 | 19.00 | 8 | 4.00 | 24.00 |
25-3 (b) (1)Output (suits cleaned) | (2)Price per Suit | (3)Total Costs | (4)Total Revenue (4)=(2)x(1) | (5)Total Profit (5)=(4)x(3) | 0 | 8.00 | 3.00 | 0 | -3.00 | 1 | 7.50 | 6.00 | 7.50 | 1.50 | 2 | 7.00 | 8.50 | 14.00 | 5.50 | 3 | 6.50 | 10.50 | 19.50 | 9.00 | 4 | 6.00 | 11.50 | 24.00 | 12.50 | 5 | 5.50 | 13.50 | 27.50 | 14.00 | 6 | 5.00 | 16.00 | 30.00 | 14.00 | 7 | 4.50 | 19.00 | 31.50 | 12.50 | 8 | 4.00 | 24.00 | 32.00 | 8.00 |
25-3 (c)
The profit-maximizing rate of output is between 5 and 6 units.
25-4
Given the information in Problem 25-3, calculate the dry cleaner’s marginal revenue and marginal cost at each output level. Based on marginal analysis, what is the profit-maximizing level of output?
25-4 (a)
(1)Output (suits cleaned) | (2)Price per Suit | (3)Total Costs | (4)Total Revenue (4)=(2)x(1) | (5)Total Profit (5)=(4)x(3) | (6)Marginal Cost(6)= (3)
Student ID #: A08012684
South-9:30-ECO 2023
Problem #4
25-1
Suppose that it is the year 2038. Exclusive ownership of a resource found to be required for the production of fusion power has given a firm monopoly power in the provision of this good. What is true of the relationship between the price of this resource and the marginal revenue the firm receives?
25-1 (a)
The demand curve faced by the firm is the downward-sloping market demand curve, so price exceeds marginal revenue at all quantities beyond the first unit produced.
25-3
The following table depicts the daily output, price, and costs of a monopoly dry cleaner located near the campus of a remote college town. a. Compute the revenues and profits at each output rate. b. What is the profit-maximizing rate of output?
25-3 (a) (1)Output (suits cleaned) | (2)Price per Suit | (3)Total Costs | 0 | 8.00 | 3.00 | 1 | 7.50 | 6.00 | 2 | 7.00 | 8.50 | 3 | 6.50 | 10.50 | 4 | 6.00 | 11.50 | 5 | 5.50 | 13.50 | 6 | 5.00 | 16.00 | 7 | 4.50 | 19.00 | 8 | 4.00 | 24.00 |
25-3 (b) (1)Output (suits cleaned) | (2)Price per Suit | (3)Total Costs | (4)Total Revenue (4)=(2)x(1) | (5)Total Profit (5)=(4)x(3) | 0 | 8.00 | 3.00 | 0 | -3.00 | 1 | 7.50 | 6.00 | 7.50 | 1.50 | 2 | 7.00 | 8.50 | 14.00 | 5.50 | 3 | 6.50 | 10.50 | 19.50 | 9.00 | 4 | 6.00 | 11.50 | 24.00 | 12.50 | 5 | 5.50 | 13.50 | 27.50 | 14.00 | 6 | 5.00 | 16.00 | 30.00 | 14.00 | 7 | 4.50 | 19.00 | 31.50 | 12.50 | 8 | 4.00 | 24.00 | 32.00 | 8.00 |
25-3 (c)
The profit-maximizing rate of output is between 5 and 6 units.
25-4
Given the information in Problem 25-3, calculate the dry cleaner’s marginal revenue and marginal cost at each output level. Based on marginal analysis, what is the profit-maximizing level of output?
25-4 (a)
(1)Output (suits cleaned) | (2)Price per Suit | (3)Total Costs | (4)Total Revenue (4)=(2)x(1) | (5)Total Profit (5)=(4)x(3) | (6)Marginal Cost(6)= (3)