Question

A. Complete the following table: Answer the marginal revenue.

Instructions: Enter your responses rounded to the nearest whole number. Indicate a negative response with a (-) negative sign.

Price $24 $21 $18 $15 $12 $9 $6 $3
Quantity Demanded 1 2 3 4 5 6 7 8
Marginal Revenue $ $ $ $ $ $ $ $

b. At what rate of output does marginal revenue turn negative?
c. If marginal cost is constant at $12, what is the profit-maximizing rate of output?
d. Assuming a firm has monopoly power, what price should be charged at that rate of output? $_____

Answer 1

a)

Price $24 $21 $18 $15 $12 $9 $6 $3

Quantity Demanded 1 2 3 4 5 6 7 8

Marginal Revenue $24 $18 $12 $6 $0 -$6 -$12 -$18

b) marginal revenue turns negative at 6 units

c) 5 units, since profits are maximized when MC = MR

d) $12, again profits are maximized when MC = MR