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Marginal Analysis of given cost and revenue shedules

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Problem 1

Given the following total-revenue function:
TR=9Q-Q(2)
A)Derive the total, average, and marginal revenue schedules from Q=0 to Q=6 by 1's
B)On the same set of axes, plot the total , average, and marginal-revenue schedules of part (a)
c) Then draw on the same set of axes the marginal-revenue curve derived in part 1 and the marginal-cost curve derived in problem 2, and use them to explain why the best level of output of the firm is 3 units.
d) Explain why your answer to part (a) is an example of marginal analysis and optimizing behavior in general.

Problem 2
Given the following total-cost schedule:
Q 0 1 2 3 4
TC 1 12 14 15 20
Derive the average and marginal-cost schedule

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Solution Summary

There are two problems. Solutionds to these problems explain the steps to calculate average revenue, marginal revenue, average cost and marginal costs. It also helps to determine profit maximization output with the help of given schedules.

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Please refer attached file for better clarity of formulas and tables. Graphs used in the solution will not print here.

Solution 1.
A)Derive the total, average, and marginal revenue schedules from Q=0 to Q=6 by 1's

Average Cost=TR/Q=(9Q-Q^2)/Q=9-Q
Marginal Revenue=d(TR)/dQ=9-2Q

Q TR Average Revenue Marginal Revenue
=9Q-Q^2 =(9-Q) =(9-2Q)
0 0
1 8 8 7
2 14 7 5
3 18 6 3
4 20 5 1
5 20 4 -1
6 18 3 -3
B)     On the same set of axes, plot the ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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