(a) Complete the following table: Instructions: Enter your responses rounded to

Question

(a) Complete the following table: Instructions: Enter your responses rounded to the nearest whole number. Indicate a negative response with a (-) negative sign. Price $26 $23 $20 $17 $14 $11 $9 $5 Quantity demanded 1 2 3 4 5 6 7 8 Marginal revenue $ $ $ $ $ $ $ $ (b) At what rate of output does marginal revenue turn negative? (c) If marginal cost is constant at $14, what is the profit-maximizing rate of output? (d) Assuming a firm has monopoly power, what price should be charged at that rate of output? $

Explanation / Answer

a.

b.

At 6 unit of output, marginal revenue becomes negative and it is -$4.

c.

For profit maximizing output,  

Marginal revenue = Marginal Cost

At marginal cost =$14,   marginal revenue of $14 is achieved at the output level of 3 units.

Thus, profit maximizing output will be 3 units.

d.

Monopolist will charge a price of $20 at the output level of 3 units.

Price ($) quantity Demanded Total Revenue Marginal Revenue ($) 26 1 26 23 2 46 20 20 3 60 14 17 4 68 8 14 5 70 2 11 6 66 -4 9 7 63 -3 5 8 40 -23

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