# average marginal revenue

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?

#### 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.