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2. Calculating marginal revenue from a linear demand curve The blue curve on the following graph represents the demand curve facing a rm that can
2. Calculating marginal revenue from a linear demand curve The blue curve on the following graph represents the demand curve facing a rm that can set its own prices. Use the graph input tool to help you answer the following questions. You will not be scored on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. _\\ Graph Input Tool (Cb 200 _. Market for Goods 180 - Quantity Demanded 16 - (Units) 55 140 Demand Price 2 (Dollars per unit) 100'00 g 120 U1 '=ti 100 --------.+ O 9 so 8 _ so __ E Demand 40 20 O 1llllilllli 0 2 4 6 8 10 12 14 16 18 20 QUANTITY (Units) On the previous graph, change the number found in the Quantity Demanded field to determine the prices that correspond to the production of 0, 4, 8, 10, 12, 16, or 20 units of output. Calculate the total revenue for each of these production levels. Then, on the following graph, use the green points (triangle symbol) to plot the results. 1000 4 900 Total Revenue 800 700 600 500 TOTAL REVENUE (Dollars) 400 300 200 100 2 4 8 10 12 14 16 18 20 QUANTITY (Number of units) Calculate the total revenue if the firm produces 4 versus 3 units. Then, calculate the marginal revenue of the fourth unit produced. The marginal revenue of the fourth unit produced is $Based on your answers from the previous question, and assuming that the marginal revenue curve is a straight line, use the black line (plus symbol) to plot the rm '5 marginal revenue curve on the following graph. (Round all values to the nearest increment of 40.) 200 - 160 Marginal Revenue 120 - MARGINAL REVENUE (Dollars) S g : I .40 -- o 246 81012141618 20 QUANTITY (Units) Comparing your total revenue graph to your marginal revenue graph, you can see that when total revenue is decreasing, marginal revenue is V
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