Question

# Table 16-4 This table shows the demand schedule, marginal cost, and average total cost for a...

Table 16-4
This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm.

 Quantity Price Marginal Cost Average Total Cost 0 \$50 -- -- 1 \$45 \$30 \$40 2 \$40 \$24 \$32 3 \$35 \$14 \$26 4 \$30 \$10 \$22 5 \$25 \$12 \$20 6 \$20 \$32 \$22 7 \$15 \$50 \$26 8 \$10 \$74 \$32 9 \$5 \$104 \$40 10 \$0 \$140 \$50

Refer to Table 16-4. What price will this firm charge to maximize profit?

\$25

\$30

\$35

\$40

#### Homework Answers

Answer #1

option 2

\$30

--------------

Total revenue =P*Q

TR(0)=0*50=0, TR(1)=1*45=45, TR(2)=2*40=80 and so on

MR(n)=(TR(n)-TR(p))/(n-p)
MR(n)= MR of n th unit of output
TR(n)=TR of n units of output
TR(p)=TR of p units of output
it is true for n>p
MR(1)=(45-0)/(1-0)=45, MR(2)=(80-45)/(2-1)=35 and so on

 Quantity Price Marginal Cost Average Total Cost TR MR 0 50 -- -- 0 - 1 45 \$30 \$40 45 45 2 40 \$24 \$32 80 35 3 35 \$14 \$26 105 25 4 30 \$10 \$22 120 15 5 25 \$12 \$20 125 5 6 20 \$32 \$22 120 -5 7 15 \$50 \$26 105 -15 8 10 \$74 \$32 80 -25 9 5 \$104 \$40 45 -35 10 0 \$140 \$50 0 -45

the firm produces at MR=MC or the nearest lower MC

MR=15 and MC=10 before it crosses.

Q=4 units and P=\$30

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