Under monopoly which of the following regarding MR is correct? It is the slope of the...
Under monopoly which of the following regarding MR is correct?
It is the slope of the total supply function.
It is the slope of the total revenue function.
It is the slope of the total cost function.
It is the slope of the total profit function.
Homework Answers
Answer: Option –(B) it is the slope of the total revenue function
Explanation: marginal revenue refers to an addition to the total revenue (TR) due to selling an additional unit of output. In other words the marginal revenue is the ratio of change in total revenue due to change in output sold.
MR = Change in TR / Change in output sold
Thus marginal revenue is the slope of total revenue function therefore option (B) is correct. Under monopoly market structure the average revenue (AR) and marginal revenue (MR) curve sloping downward from left to right. Downward sloping of AR indicates that a monopolist can sell more of its output at less prices. But the downward sloping MR curve will always lies below the downward sloping AR curve which indicates that for any quantity the MR is less than AR.
Monopoly does not have supply curve, therefore option (A) cannot be correct.
The slope of the total cost (TC) is determined by marginal cost (MC) because marginal cost (MC) = Change in TC / Change in output produced, there for option (C) cannot be correct.
Finally the monopolist determine the profit maximising level of output, where MC=MR and MC intersects MR from below. Therefore option (D) cannot be correct
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Find the total revenue function.
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1. A monopoly is facing an inverse demand curve that is
p=200-5q. There is no fixed cost and the marginal cost of
production is given and it is equal to 50.
Find the total revenue function.
Find marginal revenue (MR).
Draw a graph showing inverse demand, MR, and marginal cost
(MC).
Find the quantity (q) that maximizes the profit.
Find price (p) that maximizes the profit.
Find total cost (TC), total revenue (TR), and profit made by
this firm.
Find...
Problem 1e. The slope
of the demand curve indicates that if the price of Fluff increases
by 20 cents, consumers will buy one less unit. Determine what
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profit level for Fluff when price is set 20 cents higher than the
profit-maximizing price.
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