Use the following graph to answer parts (a)-(e). Prices and...

Transcript

00:01 So here we've got a monopolistic competitive situation.

00:04 And so the first thing i'm going to do is to reproduce this graph.

00:07 So the vertical axis is price and cost.

00:10 We have quantity on the bottom axis.

00:12 We have a demand curve that looks like this.

00:16 We have a marginal revenue curve, which looks like this.

00:20 Actually goes all the way to negative.

00:23 Maybe i'll actually redraw this to a little bit more precise.

00:27 So the demand curve goes to 40.

00:29 The marginal revenue curve intersects at 20 like this.

00:36 My marginal cost curve is going upward sloping, sort of like this, and my average total cost curve is looking something like this, where this intersection and this intersection are well defined.

00:51 This intersection happens at a price of 12 or a cost of 12, and a quantity of also 12.

00:59 And this intersection here happens at 16 and 18.

01:07 So there's the situation with which we've been presented.

01:10 Now we have some questions.

01:12 A total revenue if the firm raises goes from 9 to 12, right? so what is going to happen here, right? we need to think about what revenue is, right? remember that total revenue is equal to price times quantity.

01:34 So total revenue at price equals to nine is equal to nine times what.

01:38 Well, you have to read that off the demand curve, right? if you look at the demand curve, at a price of nine and you go over, you see that the number on the demand curve is 28.

01:48 And at a price of 12, you again say, well, if the price is 12, what's the quantity going to be sold in the marketplace? if you look, prices 12, read it off the demand curve.

01:59 You get the quantity of 24.

02:01 So this goes straight into your calculator, and you get 9 times 28, which is 252.

02:11 And then you also get 12 times 24, which is going to be 288.

02:21 So as you raised the price here, you actually...

02:28 Generated more revenue, right? not super surprising.

02:35 Remember, the marginal revenue is negative here over these units.

02:39 So going from 12 to 9, of course, had to lower revenue...

Question

Use the following graph to answer parts (a)-(e). Prices and costs are in dollars. Price, Cost 30 27 24 21 18 15 12 9 6 3 0 4 8 12 16 20 24 28 32 36 40 MC ATC MR Quantity D

Question

Use the following graph to answer parts (a)-(e). Prices and costs are in dollars. Price, Cost 30 27 24 21 18 15 12 9 6 3 0 4 8 12 16 20 24 28 32 36 40 MC ATC MR Quantity D

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