Chap14 - Revenue Marginal Revenue Profit $8--- $0---$-8 1 9...

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Problems and Applications 1.  Because a new customer is offering to pay $300 for one dose, the marginal revenue of the 201st  dose is $300. Now we must find out if marginal cost is greater than or less than $300. To do this,  we need to calculate total cost for 200 doses and 201 doses, and then calculate the increase in  total cost. Multiplying quantity by average total cost, we find that total cost rises from $40,000 to  $40,401, so marginal cost is $401. Therefore, your roommate should not make the additional  dose. 5. Here is the table showing costs, revenues, and profits: Quantity Total  Cost Marginal  Cost Total 
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Unformatted text preview: Revenue Marginal Revenue Profit $8--- $0---$-8 1 9 $1 8 $8-1 2 10 1 16 8 6 3 11 1 24 8 13 4 13 2 32 8 19 5 19 6 40 8 21 6 27 8 48 8 21 7 37 10 56 8 19 a. The firm should produce five or six units to maximize profit. b. Marginal revenue and marginal cost are graphed in Figure 4. The curves cross at a quantity between five and six units, yielding the same answer as in Part (a). FIRMS IN COMPETITIVE MARKETS 14 Figure 4 c. This industry is competitive because marginal revenue is the same for each quantity. The industry is not in long-run equilibrium, because profit is not equal to zero....
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This note was uploaded on 10/13/2010 for the course ECON 200 taught by Professor Levendis during the Fall '07 term at Loyola New Orleans.

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Chap14 - Revenue Marginal Revenue Profit $8--- $0---$-8 1 9...

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