# Marginal Revenue (MR)

Suppose a competitive firm’s cost information is as shown in the table below. Its total fixed cost is \$9.00.

 Output Marginal Cost Average Variable Cost Average Total Cost 0 1 \$ 8.00 \$8.00 \$17.00 2 7.00 7.50 12.00 3 6.00 7.00 10.00 4 5.00 6.50 8.75 5 6.00 6.40 8.20 6 7.00 6.50 8.00 7 8.00 6.71 8.00 8 9.00 7.00 8.13 9 10.00 7.33 8.33 10 11.00 7.70 8.60

a. Suppose the firm sells its output at a price of \$9.10. What is the firm’s marginal revenue (MR)?

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b. Compare MR to marginal cost (MC) to determine the firm’s profit maximizing (loss-minimizing) output level. Be sure to check whether or not the firm should shut down.

c. What is the firm’s per-unit profit (loss) at this output level?

d. What is the firm’s total profit (loss) at this output level?

e. Repeat parts a. through d. assuming the price has fallen to \$7.10.

f. Repeat again assuming the price has fallen to \$6.10