Question

Question 3-4

SESSION 13 The marginal revenue is the rate of change in total revenue per unit increase in output, Q The marginal cost is the rate of change in total cost per unit increase in output, Q AR is defined as average revenue per unit for the first Q su ccessive units sold. AR is determined by dividing total reven ue by the quantity sold, Q The AR function is equal to price, P. where Pis given by the demand function. P AR for any demand function, whether it is horizontal or downward sloping. AC is total cost divided by the level of output produced. Applications of Differentiation: MR, AR, MC, AC 1) The demand function for a monopolist is Q = 120-3P (a)Find expressions for TR, MR and AR. Evaluate TR, MR and AR at Q = 15. Hence explain in words the meaning of each function at Q 15 (b)Calculate the value of Q for which AR - 0.Calculate the value of MR when AR 0. Is it sensible for a monopolist to sell this value of o (c)Graph TR, MR and AR on the same diagram. 2) The demand function for a good is P 125 - Q (a)Find expressions for TR, MR and AR. Is the slope of the MR curve twice the slope of the AR curve? (b)Evaluate TR, MR and AR at Q 10 and at Q = 25. Hence, explain in words the meaning of each function at Q- 10, Q 25 (c)Calculate the value of Q for which MR 0. Calculate the value of Q for which AR 0 At what point (value of Q) does the sale of further units first start to reduce total revenue? Explain (d)Graph TR, MR and AR on the same diagram

Answer 1

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