EBK PRINCIPLES OF MICROECONOMICS (SECON
2nd Edition
ISBN: 9780393616149
Author: Mateer
Publisher: W.W.NORTON+CO. (CC)
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Question
Chapter 12, Problem 8SP
(a)
To determine
Graphical representation of price and mark up.
(b)
To determine
Shows the price and output in a graph.
(c)
To determine
Quality control of production in different markets.
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Andrea's Day Spa began to offer a relaxing aromatherapy treatment. The firm asks you how
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A friend has just started up her own business. Her firm asks you how much to charge for her product to maximize profits. The demand schedule for it is given by the first two columns in the table below; its total costs are given in the third column. For each level of output, you can calculate total revenue, marginal revenue, average cost, and marginal cost. The profit-maximizing level of output can be found at the point where TR - TC is greatest, or where MR = MC, (or the last quantity where MR is still greater than MC.)
What is the profit-maximizing level of output for her product? 40
How much will she earn in profits? 80
Price Quantity TC TR? MR? MC?
$25.00 0 $130
$24.00 10 $275
$23.00 20 $435
$22.50 30 $610
$22.00 40 $800
$21.60 50 $1,005
$21.20 60 $1,225
A publisher has the following table of demand for the next novel by one of its famous authors:
Price
Number of novel in demand
100
0
90
1
80
2
70
3
60
4
50
5
40
6
30
7
20
8
10
9
0
10
The author is paid $2 to write the book (Fixed Cost or FC) and the marginal cost (MC) of publishing it is a constant $10 per book.
a) Calculate the total revenue, total cost, and corresponding profits for each quantity. What quantity would a profit-maximizing publisher choose? What price would he set?
b) Calculate marginal revenue. How does marginal revenue compare to price? Explain.
c) Plot the marginal revenue (MR), marginal cost (MC), and demand (D) curves. At what quantity do the marginal revenue and marginal cost curves intersect? What does this mean?
d) Obtain the economic profits (EP) of this monopolist and graph.
Chapter 12 Solutions
EBK PRINCIPLES OF MICROECONOMICS (SECON
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