Your friend decides to travel abroad to a popular destination to operate a business. He is faced with the following monthly demand schedule: Price per unit Quantity Total Revenue Marginal revenue $50 100 S46 200 $41 300 $35 400 $28 500 $20 600 $11 700 He has a total fixed cost of $2000 per month and has a constant marginal cost of $31. a. Help your friend to calculate his monthly total revenue and marginal revenue at each quantity by copying and completing the above table. b. To maximize profit, what quantity should your friend produce per month? What price should he charge? c. Someone told your friend that he should instead produce 400 units of the good. Do you agree? Explain to your friend why he should or should not do this. d. If your friend was operating in a perfectly competitive market what output level would he be more likely to produce?

Your friend decides to travel abroad to a popular destination to operate a business. He is faced with the following monthly demand schedule: Price per unit Quantity Total Revenue Marginal revenue $50 100 S46 200 $41 300 $35 400 $28 500 $20 600 $11 700 He has a total fixed cost of $2000 per month and has a constant marginal cost of $31. a. Help your friend to calculate his monthly total revenue and marginal revenue at each quantity by copying and completing the above table. b. To maximize profit, what quantity should your friend produce per month? What price should he charge? c. Someone told your friend that he should instead produce 400 units of the good. Do you agree? Explain to your friend why he should or should not do this. d. If your friend was operating in a perfectly competitive market what output level would he be more likely to produce?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter3: Demand Analysis

Section: Chapter Questions

Problem 2.5CE

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