Use the demand schedule that follows to answer questions 1, 2, and 3.
1. calculate total revenue and marginal revenue at each quantity.
2. Use Chapter 4's total-revenue test for price elasticity to determine at which price levels the demand is elastic and inelastic.
3. Suppose the marginal cost of successive units of output were $3.50. What output would the profit-seeking firm produce and what price would the firm charge?
|
Price
|
Quantity Demanded
|
Total Revenue
|
Marginal Revenue
|
Elasticity
|
|
$ 8.00
|
0
|
|
|
|
|
$ 7.50
|
1
|
|
|
|
|
$ 7.00
|
2
|
|
|
|
|
$ 6.50
|
3
|
|
|
|
|
$ 6.00
|
4
|
|
|
|
|
$ 5.50
|
5
|
|
|
|
|
$ 5.00
|
6
|
|
|
|
|
$ 4.50
|
7
|
|
|
|
|
$ 4.00
|
8
|
|
|
|
|
$ 3.50
|
9
|
|
|
|
|
$ 3.00
|
10
|
|
|
|
A book publisher initially prices both hardback books and paperback books at $20 per book. The hardback version comes out first, followed two months later by the paperback version. The publisher initially sells the same number of hardbacks and softbacks (100 each). A hardback book costs $3.00 to produce, and a paperback book costs $2.00 to produce.