00:06
We want to know what will happen to total revenue if the firm raises the price from 9 to 12.
00:13
So our total revenue is equal to the price times the quantity.
00:25
So if the price is 9, we multiply this by the profit maximizing quantity.
00:34
So the profit maximizing quantity is where marginal revenue is equal to marginal cost.
00:38
So where these two curves cross, the quantity is equal to 12.
00:46
So now when the price is 9, we do 9 times 12 and that gives us our total revenue.
00:54
So that's 108.
00:59
And for the next part, the price is 12.
01:04
So now total revenue becomes 144.
01:11
So it increases.
01:12
So if we find the difference, we get that it increases by 36.
01:26
At 16 units, is it producing the allocatively efficient quantity? so at 16 units, you can see that demand is equal to marginal cost.
01:52
So that means that this is the allocatively efficient quantity.
02:04
This is also called the socially optimal quantity.
02:12
If the firm produces 12 units, will the profit be positive, negative, or zero? so taking a look at the graph, we need to compare the average total cost and the average revenue at 12 units.
02:47
So at 12 units, based on our average total cost curve, our average total cost is a little less than 30.
03:03
And then our average revenue is the demand curve.
03:14
So comparing these two, you can see that our average total cost is above our average revenue.
03:27
So it makes sense if our costs are greater than our revenue, this is an economic loss.
03:43
So it's going to be negative.
03:54
So for the next one, if we look at the relationship between marginal cost and average total cost, when the average total cost is falling, marginal cost is less than average total cost.
04:26
So if we look at our graph, our average total cost is up here.
04:35
And then this is our marginal cost...