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    average marginal revenue

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    Chapter 10 Problem 2
    In 2001, the box industry was perfectly competitive. The lowest point on the
    long-run averge cost cureve of each of the identical box producers was #4, and this
    minimum point occured at an output of 1,000 boxes per month.
    The market demand curve for boxes was : Qd = 140,000 - 10,000P

    Where P is the price of a box (in dolars per box) and Qd is the quantity of boxes
    demanded per month. The market suply curve for boxes was: Qs = 80,000 + 5,000P

    where Qs is the quantity of boxes supplied per month.
    a. What is the equilbrium price of a box? Is this the long-run equilibruim price?
    With help solving this problem: At equilibruim, supple equals demand: Qs = Qd
    solve for P.
    The long -run equilibruim prie is the minimum long-run average total cost of all the
    firms.
    b. How many firms are in this industry when it is long-run equilbrium?

    To help with solving this problem:

    Chapter 11 Problem 2:
    The Wilson Company's marketing manager has determined that the price elasticity of
    demand for its product equals -2.2. According to studies he carried, the
    relationship between the amount spent by the firm on avertising and its sales is as
    follows:
    Advertising expenditure Sales
    $100,000 $1.0 million
    $200,000 $1.3 million
    $300,000 $1.5 million
    $400,00 $1.6 million

    a. If the Wilson Company spends $200,000 on advertising, what is the marginal
    revenue from an extrac dollar of advertising? To help with solving this problem:

    The average marginal revenue over the range of $100,000 to $200,000 advertising
    spending =

    The average marginal revenue over the range of $200,000 to $300,000 advertising
    spending =

    The average marginal revenue over the range of $100,000 to $300,000 advertising
    spending =

    To decide on the best approximation of the marginal revenue from another dollar of
    advertising at $200,000.

    B. Is $200,00 the optimal amount for the firm to spend on advertising?

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    Solution Preview

    Chapter 10 Problem 2
    In 2001, the box industry was perfectly competitive. The lowest point on the
    long-run averge cost curve of each of the identical box producers was #4, and this
    minimum point occured at an output of 1,000 boxes per month.
    The market demand curve for boxes was : Qd = 140,000 - 10,000P
    Where P is the price of a box (in dolars per box) and Qd is the quantity of boxes
    demanded per month. The market suply curve for boxes was: Qs = 80,000 + 5,000P
    where Qs is the quantity of boxes supplied per month.

    a. What is the equilbrium price of a box? Is this the long-run equilibruim price?
    With help solving this problem:
    The long -run equilibruim prie is the minimum long-run average total cost of all ...

    Solution Summary

    The total revenue is assessed.

    $2.19