Answered: Question #1 a. For the following three…

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

ChapterB: Differential Calculus Techniques In Management

Section: Chapter Questions

Problem 2E

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Please show work for each so I may better understand for study purposes. Question #1 a. For the following three cases, calculate i: The marginal revenue curve ii: The level of output where MR = MC (i.e., set the equation from item i equal to marginal cost and solve for Q) iii: The profit-maximizing price (i.e., plug your answer from equation ii into the demand curve) iv: Total revenue and total cost at this level of output v: total profit Case A: Demand: P = 40 − Q Fixed cost = 100 Marginal cost = 10 Case B: Demand: P = 100 − 2Q Fixed cost = 100 Marginal cost = 10 Case C: Demand: P = 100 − 2Q Fixed cost = 100 Marginal cost = 20. b. What is the markup in each case? Measure it two ways: first in dollars, as price minus marginal cost, and then as a percentage markup [100 × (P – MC)/MC, reported as a percent c. If you solved part b correctly, you found that when costs rose from Case B to Case C, the monopolist’s optimal price increased....Why didn’t the monopolist charge that same higher price when costs were lower?

Expert Solution

Step 1

Given:

Case A	Case B	Case C
Demand: P = 40 − Q	Demand: P = 100 − 2Q	Demand: P = 100 − 2Q
Fixed cost = 100	Fixed cost = 100	Fixed cost = 100
Marginal cost = 10	Marginal cost = 10	Marginal cost = 20

To find:

i: The marginal revenue curve

ii: The level of output where MR = MC

iii: The profit-maximizing price

iv: Total revenue and total cost at this level of output

v: total profit

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