Chapter_9_Answers

Chapter_9_Answers - Chapter 9 I 1 2 3 4 5 6 7 8 9 10 11 12...

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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. A 31. B 32. B 33. 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
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half as much as the demand curve. The slope of the marginal revenue curve = 2*the slope of the demand curve = 2. 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.
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Chapter_9_Answers - Chapter 9 I 1 2 3 4 5 6 7 8 9 10 11 12...

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