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This problem gives you a preview of something you might see in a microeconomics class. Suppose there's an appliance store that sells air conditioners. It
This problem gives you a preview of something you might see in a microeconomics class. Suppose there's an appliance store that sells air conditioners. It could set its price high and sell very few air conditioners, or it could set its price low and sell many more air conditioners. The following table shows some possible choices this store could make: Price Quantity Total Revenue (P x Q) (Dollars per air conditioner) (Air conditioners per year) (Dollars per year) A 720 0 0 B 540 100 54,000 C 360 200 72,000 D 180 300 54,000 E 0 400 0 The graph below plots the firm''s total revenue curve: that is, the relationship between quantity and total revenue given by the two right columns in the table above. The five choices are also labeled. Finally, two black lines are shown; these lines are tangent to the green curve at points B and D. ~) P . 9 T 8 Q C & 72 A o 2 S 63 o o - O =ra R n The graph below plots the firm's total revenue curve: that is, the relationship between quantity and total revenue given by the two right columns in the table above. The five choices are also labeled. Finally, two black lines are shown; these lines are tangent to the green curve at points B and D. Y\\ \\i?/" 90 81 72 A 45 36 27 18 TOTAL REVENUE (Thousands of dollars per year) 0 t + t + t + t FAY 0 50 100 150 200 250 300 350 400 QUANTITY (Air conditioners per year) Using the information on the slope of the lines tangent to the curve at points B and D, plot the slope of the total revenue curve on the graph below. (As it turns out, it's a straight line, so the two points you plot will determine a line.) S 450 + O 360 + 270 4 Slope of TR 180 90 -+ -180 + -270 + REVENUE (Dollars per air conditioner) -360 + -450 v 50 100 150 200 250 300 350 400 QUANTITY (Air conditioners per year) The total revenue curve reaches its maximum at a quantity of 9 air conditioners per year. At this point, the slope of the total revenue curve is v
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