Consider the information from Problem 24-13. If the total costs of producing 13 units were equal to $72.70 per week, would the marginal revenue of producing the 13th unit be greater or less than the marginal cost of producing that unit? How would the firm's weekly economic profits be affected if the firm were to produce the 13th unit?

Problem 24-13

Suppose that in Figure 24-4, the monopolist knows that if it were to reduce the price of its product to $5.40 per unit, the quantity demanded- and hence its output-would rise to 13 units per week. What would be the marginal revenue that the monopolist would derive from producing and selling a 13th unit?

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FIGURE 24-4 In panel (a), we give demand (weekly satellite television services and price), revenues, costs, and other relevant data. As shown in panel (b), the satellite TV monopolist maximizes profits where the positive difference between TR and TC is greatest. This is at an output rate of (1) Output (units) 0 1 2 3 4 5 6 7 8 9 10 11 12 Monopoly Costs, Revenues, and Profits (2) Price per Unit $8.00 7.80 7.60 7.40 7.20 7.00 6.80 6.60 6.40 6.20 6.00 5.80 5.60 Total Revenues (TR) (3) = (2) x (1) $.00 7.80 15.20 22.20 28.80 35.00 40.80 46.20 51.20 55.80 60.00 63.80 67.20 between 9 and 10 units per week. Put another way, profit maximization occurs where marginal revenue equals marginal cost, as shown in panel (c). This is at the same weekly service rate of between 9 and 10 units. (The MC curve must cut the MR curve from below.) Panel (a) (4) Total Costs (TC) $10.00 14.00 17.50 20.75 23.80 26.70 29.50 32.25 35.10 38.30 42.70 48.70 57.70 (5) Total Profit (5)= (3) - (4) -$10.00 -6.20 -2.30 1.45 5.00 8.30 11.30 13.95 16.10 17.50 17.30 15.10 9.50 (6) Marginal Cost (MC) $4.00 3.50 3.25 3.05 2.90 2.80 2.75 2.85 3.20 4.40 6.00 9.00 (7) Marginal Revenue (MR) $7.80 7.40 7.00 6.60 6.20 5.80 5.40 5.00 4.60 4.20 3.80 3.40