Jim Whitney Economics 250

Monday, April 01, 2013
 

Demand conditions for firms with market power

1. Fill in the TR column and the MR column of the following demand schedule:
P Q TR MR
12 0 whitespace.gif (816 bytes) whitespace.gif (816 bytes)
10 1 whitespace.gif (816 bytes) whitespace.gif (816 bytes)
8 2 whitespace.gif (816 bytes) whitespace.gif (816 bytes)
6 3 whitespace.gif (816 bytes) whitespace.gif (816 bytes)
4 4 whitespace.gif (816 bytes) whitespace.gif (816 bytes)
2 5 whitespace.gif (816 bytes) whitespace.gif (816 bytes)
0 6 whitespace.gif (816 bytes) whitespace.gif (816 bytes)
2. The firm's price when it sells 3 units is $6. Why is the marginal revenue of unit 3 less than that? In other words, if the firm fetches a $6 price for its third unit, why doesn't its total revenue end up rising by $6 as well?
 

 

 
3. Suppose your firm's demand (D) is given by:
        Q = 3000 - 10P.
a. What is the equation for your inverse demand function?

 
b. What is the equation for your total revenue (TR)?

 
c. What is the equation for your marginal revenue (MR)?

 
d. Use values from your equations above to complete the following table and then plot your demand curve and marginal revenue curve in the top righthand diagram, and plot your total revenue curve in the diagram below it.
Q P ($) MR ($) TR ($1000)
0      
500      
1000      
1500      
2000      
2500      
3000