Question

2. Calculating marginal revenue from a linear demand curve 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. Graph Input Tool Market for Goods 15 Quantity Demanded (Units) Demand Price (Dollars per unit) 75.00 PRICE (Dollars per unit) Demand DE+ 0 3 6 9 12 15 18 21 24 QUANTITY (Units) 27 30

Answer 1

I dont have access to the interactieve tool therefore i am deriving the demand function

P = 150 - aQ

When P = 0, Q = 30

0 = 150 - 30a

=> 30a = 150

=> a = 5

Demand function is, P = 150 - 5Q

The following values i have used to plot the total revenue circle refer the table

| 1 L | | Q O 6 12 15 18 24 30 P 150 120 90 75 60 TR 0 720 1080 1125 1080 720 L | 0

Total Revenue 1200 1000 800 Revenue 400 200 0 5 10 25 30 15 20 Quantity

Plotting the Marginal revenue curve

Refer the table for the MR

Q L MR P 145 140 135 130 125 120 115 110 105 100 95 TR 145 280 405 520 625 720 805 880 945 1000 1045 1080 135 125 115 105 95 85 75 l 65 11 55 45 35 12 90 |

TR (Q =6) = $ 720

TR (Q = 5) =.$ 625

MR =(720-625)/(6-5) = 95

TR (Q =11) = $ 1045

TR(Q =12) = $ 1080

MR =(1080-1045)/(12-11) = 35

Refer the above table

Refer below for the graph of MR

MR 10

When TR is maximum the MR is equal to zero.