ECO 211 HA9

# ECO 211 HA9 - 1.3) Total revenue equals price x quantity;...

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Microeconomics 211 Chapter 9: Monopolistic Competition HA 9 ( #1.1, 1.2, 1.3, 2.4, 2.5) 1.1) the most important differences between perfectly competitive markets and monopolistically competitive markets are that firms in monopolistically competitive industries sell differentiated products and faces a downward-sloping demand curve and marginal revue curve. Two examples of products sold in perfectly competitive markets are wheat and organic apples. Two examples of products sold in monopolistically competitive markets are women’s clothing and laptop computers. 1.2) the local McDonald’s faces a downward-sloping demand curve for Big Macs because if it increases its price, the customers will substitute away from Big Macs and buy something else. If it does raise its prices, it won’t lose all of its customers because it is conveniently located than other restaurants for some people and some people simply prefer Big Macs to other similar products.

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Unformatted text preview: 1.3) Total revenue equals price x quantity; average revenue equals total revenue divided by quantity (also equals price); marginal revenue equals change in total revenue divided by change in quantity. 2.4) Profit = Revenue – Cost = Quantity x (price – average cost) = 350 x (\$3.25 - \$3.00) = \$87.50 2.5) DVDs Rented Per Week (Q) Price (P) Total Revenue (TR) Marginal Revenue (MR) Total Cost (TC) Marginal Cost (MC) \$6.00---\$3.00---1 5.50 \$5.50 \$5.50 7.00 \$4.00 2 5.00 10.00 4.50 10.00 3.00 3 4.50 13.50 3.50 12.50 2.50 4 4.00 16.00 2.50 14.50 2.00 5 3.50 17.50 1.50 16.00 1.50 6 3.00 18.00 0.50 17.00 1.00 7 2.50 17.50-0.50 18.50 1.50 8 2.00 16.00-1.50 21.50 2.50 a) Jill should rent 5 DVDs – this is where MC – MR. She should charge a price of \$3.50 per DVD. Her profit will be \$17.50 – 16.00 = \$1.50 b) The marginal revenue from renting the profit-maximizing DVD is \$1.50, which is the same as the marginal cost of renting this DVD....
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## This note was uploaded on 01/14/2012 for the course ECO 211 taught by Professor Morvey during the Fall '10 term at Piedmont TC.

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ECO 211 HA9 - 1.3) Total revenue equals price x quantity;...

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