Question

The blue curve on the following graph represents the demand curve facing a firm that can set its own prices. 

Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. 

Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. 

On the graph input tool, change the number found in the Quantity Demanded field to determine the prices that correspond to the production of 0, 8, 16, 20, 24, 32, and 40 units of output. Calculate the total revenue for each of these production levels. Then, on the following graph, use the green points (triangle symbol to plot the results. 

Calculate the total revenue if the firm produces 8 versus 7 units. Then, calculate the marginal revenue of the eighth unit produced. The marginal revenue of the eighth unit produced is $_______ . 

Calculate the total revenue if the firm produces 16 versus 15 units. Then, calculate the marginal revenue of the 16th unit produced. The marginal revenue of the 16th unit produced is $_______ . 

Based on your answers fro the previous question, and assuming that the marginal revenue curve is a straight line, use the black line (plus symbol) to plot the firm's marginal revenue curve on the following graph. (Round all values to the nearest increment of 40.)

 Comparing your total revenue graph to your marginal revenue graph, you can see that total revenue is _______  at the output at which marginal revenue is equal to zero.

Answer 1

Ans:

Explanation:

Total revenue =Price * Quantity

Quantity ( Units)	Price ( $)	Total Revenue ( $)
0	200	0
8	160	1280
16	120	1920
20	100	2000
24	80	1920
32	40	1280
40	0	0

Ans: The marginal revenue of the 8th unit produced is $125

Explanation:

When 7 units produced , total revenue = $165 * 7 = $1155

When 8 units produced , total revenue = $160 * 8 = $1280

Marginal revenue = Change in total revenue / Change in quantity

= ( 1280 - 1155) / ( 8 - 7) = $125 / 1 = $125

Ans: The marginal revenue of the 16th unit produced is $45

Explanation:

When 19 units produced , total revenue = $125 * 15 = $1875

When 20 units produced , total revenue = $120 * 16 = $1920

Marginal revenue = Change in total revenue / Change in quantity

= ( 1920 - 1875) / ( 16 - 15) = $45 / 1 = $45

Ans:

Explanation:

Marginal revenue = Change in total revenue / Change in quantity

Quantity ( Units)	Price ( $)	Total Revenue ( $)	Marginal Revenue ( $)
0	200	0	--
8	160	1280	160
16	120	1920	80
20	100	2000	20
24	80	1920	-20
32	40	1280	-80
40	0	0	-160

Ans: Total revenue is maximum at the output at which marginal revenue is equal to zero.