11. The following two linear functions represent a market (thus one is a supply
ID: 2429401 • Letter: 1
Question
11. The following two linear functions represent a market (thus one is a supply function, the other a demand function). Circle the answer closest to being correct. Approximately what will the equilibrium quantitybe? Q = 100 – 4.6P and Q = 75 + 6.2P
12. There has been a change in the market (represented in 11 above). The change is represented by the following two equations. .
Q = 120 – 4.6P and Q = 75 + 6.2P
13. What is the function that represents the marginal revenue (MR) function for this demand function: Q = 120 – 4.6P
14. Circle the quantity that maximizes total revenue (TR) for the marginal revenue (MR) function selected in number three (13).
Explanation / Answer
11. Qd= 100- 4.6P
Qs = 75 + 6.2 P
Qd = Qs
100- 4.6P = 75 + 6.2P
25 = 10.8 P
P = $ 2.31
Q = 100 - 4.6(2.31) = 100 - 10.63
Q = 89.37 (Equilibrium quantity)
12. Qd = 120- 4.6 P
Qs = 75 + 6.2P
13. Qd= 120- 4.6P
120- Q = 4.6P
P = (120-Q)/ 4.6
Total revenue = P(Q)
= [(120-Q)/ 4.6 ] Q
=( 120 Q -Q2 )/4.6
Marginal revenue = (120 - 2Q )/4.6
= 26.08 - 0.43Q
14. Now, to see at which quantity total revenue maximises, equate MR to 0, we get:
MR = 26.08 - 0.43 Q= 0
Q = 26.08/0.43
Q = 60.65
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