stock market by investing in monopolistic rather than in competitive industries. ANS: F DIF: 1 5. If he produces anything at all‚ a profit-maximizing monopolist with some fixed costs and no variable costs will set price and output so as to maximize revenue. ANS: T DIF: 1 6. For a monopolist who faces a downward-sloping demand curve‚ marginal revenue is less than price whenever quantity sold is positive. ANS: T DIF: 1 7. A monopolist with constant marginal costs faces a demand curve with
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of both marginal revenue and marginal cost play a major role. The economically working definition of marginal revenue is termed as: the extra revenue that an additional unit of product will bring. It is the additional income from selling one more unit of a good; sometimes equal to price (MoneyTerms‚ 2005). The marginal revenue of the output of any given product ties closely in the total revenue‚ because‚ dependent upon the final amount of additional units sold‚ the total revenue of a product can
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following average revenue (demand) curve: P = 120 - 0.02Q where Q is weekly production and P is price‚ measured in rupees per unit. The firm’s cost function is given by C = 60Q + 25‚000. Assume that the firm maximizes profits. What is the level of production‚ price‚ and total profit per week? Ans1. Level of optimal production is obtained by setting Marginal Revenue equal to Marginal Cost. If Demand function is Linear then‚ P=a-bq Revenue is R (Q)=P(Q)Q and Marginal Revenue (MR)=a-2bq Here
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seller will a. have a negligible impact on the market price. b. have little effect on market equilibrium quantity but will affect market equilibrium price. c. affect marginal revenue and average revenue but not price. d. adversely affect the profitability of more than one firm in the market. Table 14-1 Quantity Total Revenue 0 $0 1 $7 2 $14 3 $21 4 $28 2. Refer to Table 14-1. For a firm operating in a competitive market‚ the price is a. $0. b. $7. c. $14. d. $21. 3. Suppose that a firm operating
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peak travel/tourism seasons at each of its locations. The total number of scheduled tours varies based on the number of vessels available at each location. Copa also offers its ships exclusively for groups. In fact‚ a significant portion of Copa’s revenues come from group bookings. Typically‚ group customers book for corporate events‚ weddings‚ or private celebrations (e.g. family reunion). Copa customizes the table arrangement‚ the deck‚ and the menu to suit its customers’ needs for a group event
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Bernard’s Hair Design is P = 15 – 0.15Q where Q is the number of cuts per week and P is the price of a haircut. Terry is considering raising her price above the current price of RM9. Terry is unwilling to raise price of the price hike will cause revenue to fall. Should Terry raise the price of haircuts above RM9? Why or why not? b) Terry is trying to decide on the number of people to employ based on the following short-run production function: Q = 12L – 0.5L2 Where
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What Quantity of Output should the Firm Produce and Sell and at What Price? The Answer depends on Revenue and Cost Predictions. The Solution is Found using Marginal Analysis. Expand an Activity if and only if the Extra Benefit exceeds the Extra Cost. MAXIMIZING PROFIT FROM MICROCHIPS 2.2 A1. Focus on a single Product‚ A2. whose Revenues and Costs can be predicted with Certainty. Revenue can be predicted using the Demand Curve. P = 170 - 20Q or equivalently‚ Q = 8.5 - .05P Write profit
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they employ due to the increase in the minimum price‚ thereby reducing social welfare. . Explain why a profit maximizing firm produces the output that equates marginal revenues to marginal costs (MR=MC) A profit maximising firm would strive to operate at the point where the output equates marginal revenue to marginal costs‚ where marginal revenue is the revenue generated from the sale of 1 more unit and marginal costs are the costs incurred by the production of that unit.
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wealth The reduction in peoples ’ wealth caused by a stock-market crash reduces their income‚ leading to a reduction in the demand for minivans. Question 3 If demand is inelastic how will an increase in price change the total revenue? Answer: What do we know about Price Elasticity of Demand and how does it affect the price change of a production? Basically‚ the price elasticity of demand is a platform to measure
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CONSULTING PROJECT Pricing and Production Decisions at PoolVac‚ Inc. PoolVac‚ Inc. manufactures and sells a single product called the “Sting Ray‚” which is a patent-protected automatic cleaning device for swimming pools. PoolVac’s Sting Ray accounts for 65 percent of total industry sales of automatic pool cleaners. Its closest competitor‚ Howard Industries‚ sells a competing pool cleaner that has captured about 18 percent of the market. Six other very small firms share the rest of the industry’s
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