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Doncouse_Jeremy_Week3-1

Doncouse_Jeremy_Week3-1 - Jeremy Doncouse ECON202 Chapter...

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Jeremy Doncouse ECON202 Chapter 22 Key Questions 10/18/2008 4) Elastic Inelastic Price (P) D TR MR $7.00 0 $0.00 $7.00 6.50 1 $6.50 $6.50 6.00 2 $12.00 5.50 5.50 3 $16.50 4.50 5.00 4 $20.00 3.50 4.50 5 $22.50 2.50 4.00 6 $24.00 1.50 3.50 7 $24.50 0.50 3.00 8 $24.00 -0.50 2.50 9 $22.50 -1.50 Because it must lower price on all units sold in order to increase its sales, an imperfectly competitive firm's marginal-revenue curve (MR) lies below its downslopint demand curve (D). The elastic and inelastic regions of demand are highlighted. Total revenue (TR) increases at a decreasing rate, reaches a maximum, and then declines. Note that in the elastic region, TR is increasing and hence MR is positive. When TR reaches its maximum, MR is zero. In the inelastic region of demand, TR is declining, so MR is negative. Marginal revenue is always less than the corresponding product price except for the first unit of ouput because marginal revenue is the change in total revenue associated with each additional unit of output. The declining amounts of marginal revenue mean that total revenue increases at a diminishing rate.
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