Frances sells earrings in the perfectly competitive earring market. Her output p
ID: 1224795 • Letter: F
Question
Frances sells earrings in the perfectly competitive earring market. Her output per day and costs are seen in the table to the right.
a. If the current equilibrium price in the earring market is
$1.80
what price will Frances charge?
A.
$2.00
B.
$5.00
C.
$1.80
D.
$1.25
b. Find the correct quantities for the missing values in the table, as represented by
(i,
ii,
iii,
and iv; enter all values as dollars and
cents).
(i)
Marginal revenue is
$nothing .
(ii)
Total revenue is
$nothing .
(iii)
Marginal revenue is
$nothing .
(iv)
Total revenue is
$nothing .
c. What quantity of earrings will maximize Frances' profit?
nothing
earrings.
Output per day
Total Cost
MC
Total Revenue
Marginal Revenue
0
$1.25
long dash—
$0.00
long dash—
1
2.25
$1.00
1.80
$1.80
2
3.15
0.90
3.60
1.80
3
4.00
0.85
5.40
(i)
4
4.65
0.65
(ii)
1.80
5
5.50
0.85
9.00
1.80
6
6.95
1.45
10.80
(iii)
7
9.35
2.40
(iv)
1.80
8
11.9
2.55
14.40
1.80
Output per day
Total Cost
MC
Total Revenue
Marginal Revenue
0
$1.25
long dash—
$0.00
long dash—
1
2.25
$1.00
1.80
$1.80
2
3.15
0.90
3.60
1.80
3
4.00
0.85
5.40
(i)
4
4.65
0.65
(ii)
1.80
5
5.50
0.85
9.00
1.80
6
6.95
1.45
10.80
(iii)
7
9.35
2.40
(iv)
1.80
8
11.9
2.55
14.40
1.80
Explanation / Answer
Ans a)
C $ 1.80
Ans b)
i) marginal revenue is $ 1.80
ii) total revenue = 1.8 * 4 =$ 7.2
iii) Marginal revenue is $ 1.80
iv) total revenue = 1.80 *7 = 12.60
c)
Profit is maximum when MR = MC
Between 6th and 7th unit , profit maximising point will be achieved
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.