Question

(a) Explain the difference between average, total, and marginal revenue? What is the shape of the...

(a) Explain the difference between average, total, and marginal revenue? What is the shape of the total and marginal revenue curves for the individual perfectly competitive firm? [5marks]

(b) Why does price equal marginal revenue for the perfectly competitive firm? What is the relationship to the demand curve for the firm? [5marks]

(c) Why is the level of output at which marginal revenue equals marginal cost the profitmaximizing output? [5marks]

(d) What conditions are necessary to determine if the purely competitive firm should produce in the short run? State the marginal revenue and marginal cost conditions and the total revenue and total cost conditions.

Homework Answers

Answer #1

Ans a total revenue is total earnings from selling product, average revenue is revenue generated per unit of output and marginal revenue is change in revenue resulting from one unit increase in output. Total revenue curve start increasing initially at increasing rate, then increase at decreasing rate and at last falls. Marginal revenue curve slopes upwards upto a point and then falls

2 Because every unit is sold at same price. Here demand curve is horizontal line at a given orice

3 Because before it MR>Mc so that increasing output increases profit and after this point Mc>MR so that reducing output reduces profit

4 price should be greater than minimum point of AVC. MR should be equal to marginal cost and difference between TR and TC should be highest possible

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Short run cost curves: a. Explain why the marginal cost curve intersects the average total and...
Short run cost curves: a. Explain why the marginal cost curve intersects the average total and variable cost curve at their respective minimum values: b. At what point on the ATC will a perfectly competitive firm always produce in the long run: c. The supply curve for a perfectly competitive firm is the same as one of the cost curves based on a specific criterion. State both the curve and the criterion:
1.  What is the difference between the short run and the long run? Explain the        Law of...
1.  What is the difference between the short run and the long run? Explain the        Law of Diminishing Marginal returns. 2.  Discuss the difference between the market demand curve of a purely      competitive industry and the demand curve confronted by an individual      firm in pure competition. 3.  What is a monopolist, and what is required for a monopolist to earn profits      in the long run? 4.  What does the demand curve facing a monopoly look like?Why? 5.  What is the Law of Diminishing Marginal Utility...
In class we looked at (short run) cost curves. Explain why the marginal cost curve intersects...
In class we looked at (short run) cost curves. Explain why the marginal cost curve intersects the average total and variable cost curves at their respective minimum values: At what point on the ATC will a perfectly competitive firm always produce in the long run: The supply curve for a perfectly competitive firm is the same as one of the cost curves based on a specific criterion. State both the curve and the criterion:
21. A monopolist's demand curve is the same as the marginal revenue curve for the product....
21. A monopolist's demand curve is the same as the marginal revenue curve for the product. Group of answer choices True False In the long-run equilibrium, both the perfectly competitive firm and the monopolistically competitive firm produce the output at which MR = MC and charge a price equal to the average total cost of production. Group of answer choices True False
A. draw the demand and marginal revenue curves. Draw a vertical line at the market price....
A. draw the demand and marginal revenue curves. Draw a vertical line at the market price. To the left of the vertical line, show the demand and marginal revenue curves for the firm before the elasticity shifted. To the right, show the demand and marginal revenue curves for the more inelastic assumption. Where does the kink in the demand curve occur? What happens to the marginal revenue curve B. an oligopolist who believes that if she decreases her price, her...
What is the difference between the derived​ (wholesale) demand curve for competitive distributors and the derived​...
What is the difference between the derived​ (wholesale) demand curve for competitive distributors and the derived​ (wholesale) demand curve for a monopoly​ distributor? Why is there a​ difference? A. The wholesale demand curves differ because monopoly distributors are price takers.​ So, their marginal revenue equals the market​ price; whereas, the competitive​ distributor's marginal revenue equals the marginal cost. B. The wholesale demand curves differ because monopoly distributors are price makers.​ So, their marginal revenue equals the market​ price; whereas, the...
Graph the marginal cost curve, average variable cost curve, marginal revenue curve ,average total revenue curve,...
Graph the marginal cost curve, average variable cost curve, marginal revenue curve ,average total revenue curve, profit, and quantity produced for a firm that has these 3 characteristics 1. In a competitive market 2. Sell an ordinary good 3. 2 Input Cobb Douglas in which one variable is fixed in the short run
1. If at its current production level, a perfectly competitive firm's marginal revenue and longminus?run marginal...
1. If at its current production level, a perfectly competitive firm's marginal revenue and longminus?run marginal cost are equal to $0.50 and its longminus?run average cost is $0.35, which of the following statements is true? A. The firm should expect the market price of its product to fall. B. The firm should expect to earn positive economic profit indefinitely. C. The firm should expect the market supply curve to decrease. D.The firm should expect the market price of its product...
The vertical distance between the average total cost and the average variable cost curves is: a....
The vertical distance between the average total cost and the average variable cost curves is: a. constant with respect to output. b. decreasing with respect to output. c. increasing with respect to output. d. equal to total fixed costs. e. none of the above. 1 points    QUESTION 11 The point at which the SRAC curve is tangent to the LRAC curve: a. represents the most efficient wa to use a given plant. b. is always the output where MC=AC....
32.   The relationship that indicates that the perfectly competitive firm in long-run equilibrium is economically efficient...
32.   The relationship that indicates that the perfectly competitive firm in long-run equilibrium is economically efficient is that A.   long-run marginal cost equals long-run average cost at long-run average cost’s lowest value. B.   the typical firm earns neither economic profits nor economic losses. C.   marginal benefit equals long-run marginal cost. D.   demand equals marginal revenue equals average revenue equals price. 33.   The perfectly competitive lobster market is in long-run equilibrium. Following an increase in demand we would expect the typical...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT