Answered: Quantity Demanded (Q) Quantity Demanded…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Use the demand schedule to the upper right to calculate total revenue and marginal revenue at each quantity. Plot the demand, total-revenue, and marginal revenue curves and explain the relationships between them. Explain why the marginal revenue of the fourth unit of output is $3.50, even though its price is $5. Use Chapter 6’s total-revenue test for price elasticity to designate the elastic and inelastic segments of your graphed demand curve. What generalization can you make as to the relationship between marginal revenue and elasticity of demand? Suppose the marginal cost of successive units of output was zero. What output would the profit-seeking fifirm produce? Finally, use your analysis to explain why a monopolist would never produce in the inelastic region of demand.

Quantity
Demanded (Q)
Quantity
Demanded (Q)
Price (P)
Price (P)
$7.00
$4.50
5
6.50
4.00
6
6.00
2
3.50
7
5.50
3
3.00
8
5.00
4
2.50

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