Mr. Kamran Ali is building houses in Karachi. He has analyzed the market carefully, and he knows that at a price of Rs.12,000,000. (Rs.12 million) he will sell 8 houses per year. In addition, he knows that at any price above Rs.12,000,000. (Rs.12 million), no one will buy his houses because the government provides equal-quality houses to anyone who wants one at Rs.12,000,000. (Rs.12 million). He also knows that for every Rs.2,000,000. (Rs.2 million), he lower his price, he will be able to sell an additional 2 units. For example, at a price of Rs.10,000,000. (Rs.10 million), he can sell 10 houses; at a price of Rs.8,000,000. (Rs.8 million), he can sell 12 houses; and so on. a. Sketch the demand curve that Mr. Kamrans' firm faces. b. Sketch the effective marginal revenue curve that his firm faces. c. If the marginal cost of building a house is Rs.10,000,000. (Rs.10 million), how many will he build and what price will he charge? What if MC = Rs.8,500,000. (Rs.8.5 million)?

Mr. Kamran Ali is building houses in Karachi. He has analyzed the market carefully, and he knows that at a price of Rs.12,000,000. (Rs.12 million) he will sell 8 houses per year. In addition, he knows that at any price above Rs.12,000,000. (Rs.12 million), no one will buy his houses because the government provides equal-quality houses to anyone who wants one at Rs.12,000,000. (Rs.12 million). He also knows that for every Rs.2,000,000. (Rs.2 million), he lower his price, he will be able to sell an additional 2 units. For example, at a price of Rs.10,000,000. (Rs.10 million), he can sell 10 houses; at a price of Rs.8,000,000. (Rs.8 million), he can sell 12 houses; and so on. a. Sketch the demand curve that Mr. Kamrans' firm faces. b. Sketch the effective marginal revenue curve that his firm faces. c. If the marginal cost of building a house is Rs.10,000,000. (Rs.10 million), how many will he build and what price will he charge? What if MC = Rs.8,500,000. (Rs.8.5 million)?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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