Q1 If the firm is producing at a quantity of output where ma

Q1: If the firm is producing at a quantity of output where marginal revenue is less than marginal cost, then,

Q2: Suppose the monopolistic competitor faces costs and demand as depicted in the table below. Given the goal of maximizing profit, what level of output would the firm choose?

Q3: Given the level of demand below, what is the marginal revenue of the third unit of production?

a)the firm\'s perceived demand will shift to the right.

Solution

Q1. Answer is C. the firm should reduce production. It increases the marginal revenue hence equilibrium shall be maintained. Q2. Answer is 3 The table of Total profits is depicted as below: Qty TR TC Profits 1 10 2 8 2 18 7 11 3 24 12 12 4 28 20 8 5 30 30 0 6 30 42 -12 Hence, profit maximum at 3 unit of output Q3. Answer is $10 Table Price Qty TR MR 25 1 25 25 22 2 44 19 18 3 54 10 15 4 60 6 12 5 60 0