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The table shows the market’s demand for a product. The marginal cost to produce one unit of product is $5. There are no fixed costs. Calculate the total revenue, marginal revenue, total cost and total
The table shows the market’s demand for a product. The marginal cost to produce one unit of product is $5. There are no fixed costs. Note that this is a market demand, not a firm’s individual demand. 1)Calculate the total revenue, marginal revenue, total cost and total profit.
Quantity Demanded Price
0 40
10 35
20 30
30 25
40 20
50 15
60 10
70 5
80 0
2) If the market is for the product is perfectly competitive, what quantity will be produce? What price will be charged? What will the firms profit be? Write a sentence explaining how you determined each of those answers. 3) If the market is a monopoly, what quantity will be produced? What price will be charged? What will the firm‘s profit be? Write a sentence explaining how you determined each of those answers.
4) Using your previous answer assume that the “monopoly” is really two firms colluding as a duopoly. They agreed to each produce half the quantity in your answer to #3 and each earn their own profit. However one of the firms cheats and produces an extra 10 units(the other firm keeps its word). What quantity will be produced by each firm? What price will be charged with this new total quantity? What is each firm’s profit?
5) Using your previous insert assume that instead both firms cheat and produce 10 extra units(each of them). What quantity will be produced? What price will be charged at this new total quantity? What is each firm‘s profit?
6) Using complete sentences, explain which market structure leads to the best outcome for the consumer in which leads to the best outcome for the producer.
