Chapter15Graphs - Ch. 15 Figures Figure 15.1 Supersonic...

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Ch. 15 Figures Figure 15.1 Supersonic Econ’s Profit Maximizing Behaviour The table shows Supersonic Econ’s demand and cost information. Marginal revenue is calculated by calculating the change in total revenue when more planes are produced. Marginal revenue is equal to marginal cost when 360 planes are produced. This is the profit-maximizing number of planes to produce. The demand curve shows the highest price that can be set to sell 360 planes. The monopoly will set a price of $35 and sell 360 airplanes. The profit --- (p - ATC) Q --- is shaded in the graph. 0 5 10 15 20 25 30 35 40 0 120 240 360 480 600 720 Quantity of Airplanes $ / Airplane MC AVC ATC Profit D MR produce level of output where MR=MC Quantity of Airplanes Price Average Total Cost ($) (ATC) Marginal Revenue ($) (MR) Marginal Cost ($) (MC) 06 5 ___ 60 60 35.60 60 5.60 120 55 19.20 50 2.80 180 50 13.20 40 1.20 240 45 10.10 30 0.80 300 40 8.40 20 1.60 360 35 7.60 10 3.60 420 30 7.48 0 6.80 480 25 7.95 -10 11.20 540 20 8.93 -20 16.80 600 15 10.40 -30 23.60 660 10 12.32 -40 31.60 720 5 14.70 -50 40.80 780 0 17.50 -60 51.20 set a price to sell that output
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Ch. 15 Figures Figure 15.2 Supersonic Econ as a Monopoly and Perfectly Competitive Firm Part a) shows Supersonic Econ as a monopoly --- its profit maximizing output level, the price it sets, and its profit. Part b) shows Supersonic Econ instead as a price-taking perfectly competitive company. As a monopoly it earns profit of $9,864. As a perfectly competitive company, Supersonic Econ sells 9 planes at the market price of $20 and earns profit of $99.63. All of the 60 perfectly competitive firms together earn profit of $5977.80. In the case of monopoly, the price of an airplane is higher, fewer are sold, yet the company earns more profit. 0
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This note was uploaded on 01/24/2012 for the course ECON 101 taught by Professor Gerson during the Fall '08 term at University of Michigan.

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Chapter15Graphs - Ch. 15 Figures Figure 15.1 Supersonic...

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