Question 10 options: Total revenue will increase $13.50. Total revenue will incr
ID: 1222743 • Letter: Q
Question
Question 10 options:
Total revenue will increase $13.50.
Total revenue will increase $11.00.
Total revenue will increase $9.00.
Total revenue will increase $6.00.
none of the above.
A firm with market power faces the following estimated demand and average variable cost functions:
where Qd is quantity demanded, P is price, M is income, and PR is the price of a related good. The firm expects income to be $40,000 and PR to be $2. Total fixed cost is $100,000.
What is the profit-maximizing choice of output?
Question 8 options:
8,000 units
10,000 units
12,000 units
16,000 units
0 units, the firm shuts down
Total revenue will increase $13.50.
Total revenue will increase $11.00.
Total revenue will increase $9.00.
Total revenue will increase $6.00.
none of the above.
Explanation / Answer
1st question- When output is 50 units, what will happen to total revenue if the firm sells another unit of output?
the solution is Total revenue will increase $6.00. Its because the MR is in decrease trend. though total revenue increases but marginal revenue falls.
2nd question-
The firm expects income to be $40,000 and PR to be $2. Total fixed cost is $100,000.
The profit maximizing output will be 16000 as no variable cost and only fixed cost. so one should produce maximum output as possible to maximize proft.
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