The figure above shows the demand and cost curves facing a price-setting firm. 2
ID: 1206767 • Letter: T
Question
The figure above shows the demand and cost curves facing a price-setting firm.
20 What is marginal revenue when output is 100 units?
a. $10
b. $20
c. $25
d. $30
e. $35
21 At what output is marginal revenue $20?
a. 100 units
b. 200 units
c. 300 units
d. 400 units
e. 500 units
22 The profit-maximizing (or loss-minimizing) level of output is
a. 100
b. 200
c. 300
d. 400
e. 450
23 In profit-maximizing (or loss-minimizing) equilibrium, the price-setting firm earns $______ in total revenue, which is ___________ the maximum possible total revenue of $________.
a. $7,500; equal to; $7,500
b. $8,000; more than; $7,500
c. $7,650; less than; $8,000
d. $8,000; equal to; $8,000
e. $7,500; less than; $8,000
24 The maximum profit the firm can earn is $________.
a. -$4,500
b. -$1,500
c. $7,500
d. $7,650
e. $8,000
Explanation / Answer
20. d. $30 ( Locating 100 on MR curve)
21. b. 200 units ( Locating 20 on MR curve)
22. e. $7,500; less than; $8,000
TR = P x Q => 300x25 = 7500,
TR is maximum, when MR is zero. At 0 MR ' TR = 400 x 20 = 8000
23. b. -$1,500
TC = 30 x 300 = 900 which is less than TR by 1500
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