{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

# Chapter%209%20Answers - c If MC=30 profit maximizing...

This preview shows pages 1–2. Sign up to view the full content.

Chapter 9 I. Multiple-choice Questions 1. C 2. A 3. C 4. D 5. B 6. A 7. C 8. D 9. C 10. C 11. C 12. D 13. A 14. C 15. C 16. C 17. A 18. D 19. D 20. D 21. D 22. C 23. D 24. A 25. B 26. A 27. B 28. C 29. D 30. D II. Short-answer Questions: 1. a) From the graph, we can find out that the demand curve is represented by P = 70 – Q. Hence the marginal revenue curve is represented by MR = 70 – 2Q. (In general, if the demand curve is P = a + bQ then the MR curve will be P = a + 2bQ). In this case, when Q=30, MR=70-2*30 = 10. When Q=50, MR = 70-2*50 = -30. b) the MR curve has same vertical intercept as the demand curve but has a horizontal intercept half as much as the demand curve. The slope of the marginal revenue curve = 2*the slope of the demand curve = 2.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: c) If MC=30, profit maximizing quantity Q* must satisfy MR = MC = 30. Since MR = 70-2Q, we must have 70-2Q* = 30 Hence, Q* = 20. d) To sell 20 units, the firm needs to set the price to be P* = 70 – Q* = 70 – 20 = \$50. Profit at this quantity = (P-ATC)*Q = (50-60)*20 = -\$200. This firm is taking an economic loss of \$20. 2. a) & (b) the marginal revenue are: \$60, \$48, \$36, \$24, \$12, 0, -\$12, -\$24. The optimal quantity is 5. To sell 5 units, the bookstore should charge a price of \$36. c) The economic profit = (\$36-\$12)*5 = \$120. d) The socially efficient number should be at least 8 since the 8 th person still has a reservation price higher than the marginal cost....
View Full Document

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern