Economics

Market demand in Question 3
Price per unit 20 19 18 17 16 15 14 13 12 11
Demand 10 11 12 13 14 15 16 17 18 19
Total revenue 200 209 216 221 224 225 224 221 216 209
Marginal revenue 9 7 5 3 1 -1 -3 -5 -7
Question 4
Check the graph attached
Check the graph attached

Marginal Cost MC  Marginal Revenue MR at the point where the graph lines of MC and MR intersect. In this case, marginal revenue and marginal cost intersect at an output of 12 units per day. (Indicated on the graph).

A monopolist will produce at the rate of output where MRMC. This is because at that intersection, there are maximized profits. The demand curve indicates the maximum price that consumers are willing to pay for that particular output rate. This demand curve is similar to the price curve that consumers are willing to pay. Therefore, an extension from the intersection of the MR and MC curves to the demand curve is the price that the monopolist will charge for that profit maximizing rate of output. In this case,  18. Since the monopolist is the only producer in the market, he does not have to charge the price that is best for the consumer. He thus sets a price that maximizes profits for him.

In a perfectly competitive market, there are many producers in the industry and in order to survive in the industry, producers are forced to conform to the demands and wishes of the consumers. Therefore, although profits are maximized at the point where the MC and MR curves intersect, the demand of the consumers forces them to reduce their prices to a price that consumers are willing to pay. Therefore, instead of charging the price at the MC and MR intersection, the price at the intersection of the MC and Demand price curve is charged. This leads to higher production but less profit. In this case, the prevailing price will be  15. (Indicated at the intersection of the MC curve and the demand price curve)

An extension of this intersection to the level of production axis determines the level of output production. In this case, production is 15 units per day. (Indicated on the graph).

Question 5
Units demanded          Price per unit     Total Revenue Marginal Revenue
10 50 500
12 46 552 (552-500)2 26
14 42 588 (588-552)2 18
17 35 595 (595-588)3 2.33
25 30 750 (750-595)8 19.375
50 22 1100 (1100-750)25 14
150 14 2100 (2100-1100)100 10

Total Revenue  price per unit  units demanded
Marginal revenue is the contribution to total revenue due to the production of an extra unit of output.