Chapter 61, Problem 1CYU

To determine

Demand schedule, marginal revenue schedule, quantity effect component, price effect component, and profit-maximizing output level.

Explanation of Solution

Quantity of emeralds demanded	Total revenue	Demand (Average revenue)	Marginal Revenue	Quantity effect	Price effect
1	$100	100	-	-	-
2	$186	93	$86	$93	-$7
3	$252	84	$66	$84	-$18
4	$280	70	$28	$70	-$42
5	$250	50	-$30	$50	-$80

1. In the above schedule, the demand schedule is calculated by dividing the total revenue by quantity because the demand curve is the average curve.
2. In the above schedule, marginal revenue has calculated as an increase in total revenue when an extra unit of output is produced.
3. In the above schedule, the quantity effect is determined at each level of output.
4. In the above schedule price effect is determined at each level of output.
5. To determine Emerald, Inc.’s profit-maximizing output level, marginal cost is needed because at maximization output level MR=MC.

Economics Concept Introduction

Introduction:

There is a single seller and a large number of buyers in the monopolist market. Monopolist charge higher prices due to a lack of competition and information. Total revenue is the product of price and quantity sold in the market. The average revenue curve is the demand curve which is negatively downward sloping.