Henry Potter owns the only well in town that produces clean drinking water. He faces the following demand, marginal revenue, and marginal cost curves: Demand: P=60−QP=60−Q Marginal Revenue: MR=60−2QMR=60−2Q Marginal Cost: MC=QMC=Q On the following graph, use the blue line (circle symbol) to graph Mr. Potter's demand curve. Then, use the black line (cross symbol) to graph his marginal revenue (MR) curve. Next, use the orange line (square symbol) to graph his marginal cost (MC) curve. Finally, use the grey point (star symbol) to indicate the profit-maximizing price and quantity. :
Henry Potter owns the only well in town that produces clean drinking water. He faces the following demand, marginal revenue, and marginal cost curves: Demand: P=60−QP=60−Q Marginal Revenue: MR=60−2QMR=60−2Q Marginal Cost: MC=QMC=Q On the following graph, use the blue line (circle symbol) to graph Mr. Potter's demand curve. Then, use the black line (cross symbol) to graph his marginal revenue (MR) curve. Next, use the orange line (square symbol) to graph his marginal cost (MC) curve. Finally, use the grey point (star symbol) to indicate the profit-maximizing price and quantity. :
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Henry Potter owns the only well in town that produces clean drinking water. He faces the following demand, marginal revenue, and marginal cost curves:
| Demand: | P=60−QP=60−Q |
| Marginal Revenue: | MR=60−2QMR=60−2Q |
| Marginal Cost: | MC=QMC=Q |
On the following graph, use the blue line (circle symbol) to graph Mr. Potter's demand curve. Then, use the black line (cross symbol) to graph his marginal revenue (MR) curve. Next, use the orange line (square symbol) to graph his marginal cost (MC) curve. Finally, use the grey point (star symbol) to indicate the profit-maximizing price and quantity.
:
The profit-maximizing quantity is___units, and the profit-maximizing price is___.
Mayor George Bailey, concerned about water consumers, is considering a price ceiling that is 10% below the monopoly price.
At this new price, the quantity demanded would be___units.
At this quantity, the marginal cost would be___the price. Therefore, the profit-maximizing Mr. Potter___produce this amount.
George's Uncle Billy says that a price ceiling is a bad idea because price ceilings cause shortages.
True or False: A price ceiling that is 10% below the monopoly price would cause a shortage.
George's friend Clarence, who is even more concerned about consumers, suggests a price ceiling 50% below the monopoly price.
At this price, the quantity demanded would be ____ units, and the quantity supplied would be ___ units.
True or False: A price ceiling 50% below the monopoly price would cause a shortage.
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