a. Profit is maximized at a price of $ b. The profit-maximizing level of output is__ c. At the optimal level of output, total revenue is £ „ total cost is $ and profit is d. If the manager mistakenly sets price at $10 and sells 20 units, will profit margin (ie, P-ATC) be larger or smaller than when price is set at the optimal level in part c? (Note: Average total cost is $8.75 when 20 units are produced.) Using marginal anal-
a. Profit is maximized at a price of $ b. The profit-maximizing level of output is__ c. At the optimal level of output, total revenue is £ „ total cost is $ and profit is d. If the manager mistakenly sets price at $10 and sells 20 units, will profit margin (ie, P-ATC) be larger or smaller than when price is set at the optimal level in part c? (Note: Average total cost is $8.75 when 20 units are produced.) Using marginal anal-
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
economics.answer A ,B
Transcribed Image Text:7. The following graph shows demand, MR, and cost curves for a monopoly in the
short run:
12
11
SMC
10
ATC
OD
Price, marginal revenue, and cost (dollars)
Un
AVC
2
D
1
0
10 20 30 40 50 60 70 80 90 100 110 120
Output
MR
a. Profit is maximized at a price of $
b. The profit-maximizing level of output is
c. At the optimal level of output, total revenue is $
total cost is $
and profit is $
d. If the manager mistakenly sets price at $10 and sells 20 units, will profit margin (L.e.,
P-ATC) be larger or smaller than when price is set at the optimal level in part c?
(Note: Average total cost is $8.75 when 20 units are produced.) Using marginal anal-
ysis, explain why this happen
4
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