Managerial Economics - Assignment PDF

MANAGERIAL ECONOMICS 1
MANAGERIAL ECONOMICS
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MANAGERIAL ECONOMICS 2
Question 12
QD = 240 – 20P
QD = Quantity demanded = Q while P = Price
20P = 240 – Q
P = 12 – 1/20Q
From the equation above, the following values in the table have been calculated for the demand
curve:
P 0 12 6 3
Q 240 0 120 180
The marginal revenue is calculated by finding the total revenue derivative
TR = P * Q = (12 – 1/20Q) * Q = 12Q – 1/20Q2
MR = d TR/ d Q = 12 – 2/20Q ; hence the marginal revenue curve is two times steeper the
demand curve
The following values have been calculated for the marginal revenue:
MR 12 0 6 3
Q 0 120 60 90
MC = Change in TC/ Change in quantity produced
ATC = TC/Quantity produced
AVC = VC/Quantity produced
Given Q = 80, P = 12 – ((1/20)80) = 8

MANAGERIAL ECONOMICS 3
ATC = 10 and AVC = 6
Firms maximize their profits at a point whereby the marginal cost equals the marginal revenue
(Demsetz 2013, p.375).
Given Q = 80, the marginal revenue is MR = 12 – ((2/20)80) = 4
a. The graph is as shown below:
b. In the short run period, the firm makes profit. The profit made is calculated below:
Profit made = (calculated price at quantity Q which is given as 80 minus the average variable
cost which is 6) * the quantity given which is 80
Profit = (P - 6) * Q = (8 - 6) * 80 = $ 160