11. Below, the graph on the left shows the short-run marginal cost curve for a t

Question

11. Below, the graph on the left shows the short-run marginal cost curve for a typical firm selling in a perfectly competitive industry. The graph on the right shows current industry demand and supply SMC 0 s 100 150 200 250 5,000 10,000 15,.000 Firm Industry (a) If the firm's dema nd and marginal revenue curves were drawn in the left-hand graph, what would be the elasticity of demand? (b) What is the marginal revenue for the FIRM from selling the 250th unit of output? c) What output should the firm produce?

Explanation / Answer

(a) Infinitely elastic.

Infinitely elastic demand is when there is an entire horizontal demand curve. The quantity demanded in such condition will be zero at high points, but it will increase without any limit at low points.

(b) $8

(c) 200

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