Henry Potter owns the only well in town that produces clean drinking water. He faces the following demand, marginal revenue, and marginal cost curves: 1 Demand: P=100-Q Marginal Revenue: MR 100-20 Marginal Cost: MC=10+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. Price (Dollars) 110 100 90 NO 70 60 50 30 -20 30 40 60 60 -70 -60 90 110 30 50 70 80 90 Quantity (Units) Demand MR MC * Profil-Maximization 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 amount. the price. Therefore, the profit-maximizing Mr. Potter produce this 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. O True O False 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 awould be units. True or False: A price ceiling 50% below the monopoly price would cause a shortage. O True O. False
Henry Potter owns the only well in town that produces clean drinking water. He faces the following demand, marginal revenue, and marginal cost curves: 1 Demand: P=100-Q Marginal Revenue: MR 100-20 Marginal Cost: MC=10+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. Price (Dollars) 110 100 90 NO 70 60 50 30 -20 30 40 60 60 -70 -60 90 110 30 50 70 80 90 Quantity (Units) Demand MR MC * Profil-Maximization 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 amount. the price. Therefore, the profit-maximizing Mr. Potter produce this 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. O True O False 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 awould be units. True or False: A price ceiling 50% below the monopoly price would cause a shortage. O True O. False
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Transcribed Image Text:Henry Potter owns the only well in town that produces clean drinking water. He faces the following demand, marginal revenue, and marginal cost
curves:
1
Demand:
P=100-Q
Marginal Revenue: MR 100-20
Marginal Cost:
MC=10+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.
Price (Dollars)
110
100
90
NO
70
60
50
30
-20
30
40
60
60
-70
-60
90
110
30
50
70 80 90
Quantity (Units)
Demand
MR
MC
*
Profil-Maximization
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
amount.
the price. Therefore, the profit-maximizing Mr. Potter
produce this
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.
O True
O False
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 awould be
units.
True or False: A price ceiling 50% below the monopoly price would cause a shortage.
O True
O. False
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