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# firm's marginal revenue

A perfectly competitive firm has the following fixed and variable costs in the short run. The market price for the firm's product is \$150.
Output FC VC TC TR Profit/Loss
0 \$100 \$ 0 \$100 \$ 0 -\$100.00
1 \$100 100 \$200 \$150 -\$ 50.00
2 \$100 180 \$280 \$300 \$ 20.00
3 \$100 300 \$400 \$450 \$ 50.00
4 \$100 440 \$540 \$600 \$ 60.00
5 \$100 600 \$700 \$750 \$ 50.00
6 \$100 780 \$880 \$900 \$ 20.00

a. At what output rate does the firm maximize profit or minimize loss?
b. What is the firm's marginal revenue at each positive level of output? Its average revenue?
c. What can you say about the relationship between marginal revenue and marginal cost for output rates below the profit-maximizing (or loss-minimizing) rate? For output rates above the profit-maximizing (or loss-minimizing) rate?

#### Solution Preview

A perfectly competitive firm has the following fixed and variable costs in the short run. The market price for the firm's product is \$150.
Output FC VC TC TR Profit/Loss
0 \$100 \$ 0 \$100 \$ 0 -\$100.00
1 \$100 100 \$200 \$150 -\$ 50.00
2 \$100 180 \$280 \$300 \$ 20.00
3 \$100 300 \$400 \$450 \$ 50.00
4 ...

#### Solution Summary

A firm's marginal revenue is achieved.

\$2.19