
Subpart (a):
Calculate total revenue and marginal revenue.
Subpart (a):

Explanation of Solution
Table – 1 shows the schedule of market
Table – 1
| Quantity |
24 | 10,000 |
22 | 20,000 |
20 | 30,000 |
18 | 40,000 |
16 | 50,000 |
14 | 60,000 |
Total revenue is calculated using the following formula:
Substitute the respective values in Equation (1) to calculate the total revenue at quantity of 10,000 units.
Thus, total revenue is $240,000.
Marginal Revenue is calculated using the following formula:
Substitute the respective values in Equation (2) to calculate the marginal revenue at the output level of 20,000 units.
Thus, the marginal revenue is $20.
Table – 2 shows the calculation of Total Revenue and Marginal Revenue obtained by using Equations (1) and (2).
Table – 2
Price | Quantity | Total Revenue | Marginal Revenue |
24 | 10,000 | 240,000 | - |
22 | 20,000 | 440,000 | 20 |
20 | 30,000 | 600,000 | 16 |
18 | 40,000 | 720,000 | 12 |
16 | 50,000 | 800,000 | 8 |
14 | 60,000 | 840,000 | 4 |
Concept introduction:
Total revenue: Total revenue is derived by multiplying the price with total quantity sold.
Marginal revenue: Marginal revenue is the additional revenue generated due to sale of one unit of output.
Subpart (b):
Total cost and marginal cost.
Subpart (b):

Explanation of Solution
Total cost is calculated using the following formula:
Substitute the respective values in Equation (3) to calculate the total cost at 10,000 units of output. Since, the firm has only variable cost, the cost is $5.
Total cost is $50,000.
Thus, the total cost is $50,000.
Marginal Cost is calculated using the following formula:
Substitute the respective values in Equation (4) to calculate the marginal cost.
Thus, the marginal cost is $20.
Profit is calculated using the following formula:
Substitute the respective values in Equation (4) to calculate the profit at 10,000 units.
Thus, the profit is $190,000.
Table -3 shows the Total Cost and Profit obtained by using Equations (3) and (4).
Table -3
Price | Quantity | Total Revenue | Marginal Revenue | Total Cost | Marginal Cost | Profit |
24 | 10,000 | 240,000 | - | 50,000 | - | 190,000 |
22 | 20,000 | 440,000 | 20 | 100,000 | 5 | 340,000 |
20 | 30,000 | 600,000 | 16 | 150,000 | 5 | 450,000 |
18 | 40,000 | 720,000 | 12 | 200,000 | 5 | 520,000 |
16 | 50,000 | 800,000 | 8 | 250,000 | 5 | 550,000 |
14 | 60,000 | 840,000 | 4 | 300,000 | 5 | 540,000 |
A firm can achieve profit maximizing condition at the point where the marginal revenue equal to the marginal cost. Thus, from Table – 3, the quantity at which MC is closest to MR without exceeding it is 50,000 CDs at a price of $16, where the profit is $550,000.
Concept introduction:
Total cost: Total cost refers to the cost of all the inputs used by the firm. It includes both the fixed cost and the variable costs.
Marginal cost: Marginal cost is the additional cost incurred due to sale of one unit of output.
Subpart (c):
Recommended quantity.
Subpart (c):

Explanation of Solution
As Johnny's agent, the fee recommends that he demand $550,000 because all the profit generated by the firm will be received by the agents. The firm would not change the output to produce 50,000 CDs because the payment of agent’s fees does not change the marginal cost.
Want to see more full solutions like this?
Chapter 14 Solutions
Bundle: Essentials Of Economics, Loose-leaf Version, 8th + Lms Integrated Mindtap Economics, 1 Term (6 Months) Printed Access Card
- not use ai please don't kdjdkdkfjnxncjcarrow_forwardAsk one question at a time. Keep questions specific and include all details. Need more help? Subject matter experts with PhDs and Masters are standing by 24/7 to answer your question.**arrow_forward1b. (5 pts) Under the 1990 Farm Bill and given the initial situation of a target price and marketing loan, indicate where the market price (MP), quantity supplied (QS) and demanded (QD), government stocks (GS), and Deficiency Payments (DP) and Marketing Loan Gains (MLG), if any, would be on the graph below. If applicable, indicate the price floor (PF) on the graph. TP $ NLR So Do Q/yrarrow_forward
- Now, let us assume that Brie has altruistic preferences. Her utility function is now given by: 1 UB (xA, YA, TB,YB) = (1/2) (2x+2y) + (2x+2y) What would her utility be at the endowment now? (Round off your answer to the nearest whole number.) 110arrow_forwardProblema 4 (20 puntos): Supongamos que tenemos un ingreso de $120 y enfrentamos los precios P₁ =6 y P₂ =4. Nuestra función de utilidad es: U(x1, x2) = x0.4x0.6 a) Planteen el problema de optimización y obtengan las condiciones de primer orden. b) Encuentren el consumo óptimo de x1 y x2. c) ¿Cómo cambiará nuestra elección óptima si el ingreso aumenta a $180?arrow_forwardPlease draw the graph for number 4 and 5, I appreciate it!!arrow_forward
- not use ai pleasearrow_forwardnot use ai pleasearrow_forward• Prismatic Cards: A prismatic card will be a card that counts as having every suit. We will denote, e.g., a prismatic Queen card by Q*. With this notation, 2.3045 Q would be a double flush since every card is a diamond and a heart. • Wild Cards: A wild card counts as having every suit and every denomination. Denote wild cards with a W; if there are multiple, we will denote them W₁, W2, etc. With this notation, W2 20.30054 would be both a three-of-a-kind (three 2's) and a flush (5 diamonds). If we add multiple wild cards to the deck, they count as distinct cards, so that (e.g.) the following two hands count as "different hands" when counting: W15 5Q and W255◊♡♡♣♣ In addition, 1. Let's start with the unmodified double-suited deck. (a) Call a hand a flush house if it is a flush and a full house, i.e. if all cards share a suit and there are 3 cards of one denomination and two of another. For example, 550. house. How many different flush house hands are there? 2. Suppose we add one wild…arrow_forward
- not use ai pleasearrow_forwardIn a classic oil-drilling example, you are trying to decide whether to drill for oil on a field that might or might not contain any oil. Before making this decision, you have the option of hiring a geologist to perform some seismic tests and then predict whether there is any oil or not. You assess that if there is actually oil, the geologist will predict there is oil with probability 0.85 . You also assess that if there is no oil, the geologist will predict there is no oil with probability 0.90. Please answer the two questions below, as I am trying to ensure that I am correct. 1. Why will these two probabilities not appear on the decision tree? 2. Which probabilities will be on the decision tree?arrow_forwardAsap pleasearrow_forward
- Managerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher:Cengage LearningEconomics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
- Exploring EconomicsEconomicsISBN:9781544336329Author:Robert L. SextonPublisher:SAGE Publications, Inc





