In Figure 7.1\'s graph, a) At what output rate is total revenue maximized? b) Wh

Question

In Figure 7.1's graph, a) At what output rate is total revenue maximized? b) What is MR at that output rate? $14 13 12 FIGURE 7.1 Price Exceeds Marginal Revenue in Monopoly If a firm must lower its price to sell additional output, marginal revenue is less than price. If this firm wants to increase its sales from one to two pounds per hour, for example, price must be reduced from $13 to $12. The marginal revenue of the second pound is therefore only $11 (= $24 of total revenue at p = $12 minus $13 of total revenue at p = $13). This is indicated in row B of the table and by point b on the graph. than price for a monopoly 10 Demand price) Marginal revenue 1 2 34 5 6 78 9 10 QUANTITY (pounds of fish per hour) $13 12 $11 10 45 48 49

Explanation / Answer

TR IS MAXIMISED AT A POINT WHEN OUTPUT = 7.5

AT THIS POINT MR=0 AND PRICE =6.5

TR IS INCREASINGWHEN MR WAS DECREASING UPTO 7.4999 UNITS BUT POSITIVE , TR MAXIMUM WHEN MR BECOMES ZERO AT 7.5 UNIT AND TR FALLS WHEN MR BECOMES NEAGTIVE.

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