00:01
So here we're given a demand curve, right, which i'm going to replicate here.
00:03
This is a demand curve about price and quantity.
00:05
As the price goes from 10, 9, 8, 7, 6, 5, 4, 3, 2, 1, the quantity starts naturally increasing.
00:15
2, 4, 6, 9, 10, 12, 14, 16, 18, did i miss one? 2, 4, 6, 9, 10, 12, 14, 16.
00:35
I was just going to go to 20.
00:36
That looks fine.
00:39
So i assume 22 is for zero.
00:42
It's got to be.
00:44
Right.
00:44
So the key thing is that we can calculate revenue is equal to price times quantity for each of these things, right? so the revenue here would be 20.
00:53
The revenue here would be 36, 48, 63, 6.
00:58
60, 60, 56, 46, 48, and 26, and 20, right? we can calculate what the actual revenue is, and this means we can think about the marginal revenue, right? because the marginal revenue is the change in revenue.
01:17
So here we go implicitly, right, if we get plus 20, now we get plus 16, now we get plus 12, now we get plus 15, now we get plus 15, now we get minus three.
01:31
Now we get plus zero.
01:33
Now we get minus four, minus eight, et cetera, et cetera.
01:40
So here, right, if we know that the price is equal to, so we know the marginal cost is equal to five, we want to set marginal cost is equal to marginal revenue as much as we possibly can, right? so here we think about, yeah, if we produce the first one, this is greater than marginal cost.
02:03
This is greater than marginal cost.
02:05
This is greater than marginal cost.
02:07
This is greater than marginal cost.
02:08
But now we don't want to produce this, right? this would cost five, but also reduce revenue.
02:15
So this one is a bad idea.
02:17
So from this perspective, the correct answer to me says that you would actually produce nine units, right? because you want to keep producing up to there...