calculate the marginal revenue of demand graph, Macroeconomics

Gas Guzzler Motors is one of three major auto producers. It is currently producing 6,000 cars a day, and selling them at a price of $10,000 each. Its marketing department tells it that its demand curve depends critically upon whether its competitors match its price changes. If they do not change their prices when GG does, schedule l will apply; if they match GG's price changes, schedule 2 will apply. The schedules are as follows:

                                            Cars           Schedule 1     Schedule 2
                                         (in 000s)      Price per car  Price per car

                                                1                $12,500          $15,000

                                                2                  12,000            14,000

                                                3                  11,500            13,000

                                                4                  11,000            12,000

                                                5                  10,500            11,000

                                                6                  10,000            10,000

                                                7                    9,500              9,000

                                                8                    9,000              8,000

                                                9                    8,500              7,000

                                              10                    8,000              6,000

a) Calculate the marginal revenue (for increments of thousands of cars) associated with each demand schedule.

b) Draw the two demand and MR curves on graph paper.

c) Assume now that, if GG raises its price, its competitors will not raise theirs, but that, if it lowers it price, they will match the price cuts. On the graph paper, show the effective demand curve and marginal revenue curve that face GG.

Posted Date: 3/30/2013 3:37:10 AM | Location : United States

Related Discussions:- calculate the marginal revenue of demand graph, Assignment Help, Ask Question on calculate the marginal revenue of demand graph, Get Answer, Expert's Help, calculate the marginal revenue of demand graph Discussions

Write discussion on calculate the marginal revenue of demand graph
Your posts are moderated
Related Questions
Q. What do you meant by Investment? When we use the word investment, we characteristically mean 'gross investment'. Fundamentally, gross investment comprises all finished goods

Suppose that a firm has a budget of $30,000, that the wage rate is $10 per hour, and that the rental rate is about $100 per hour. I f the wage rate increases to $15 per hour and th

Using the PPC show what is meant by the law of increasing opportunity cost and explain (state) why that law exists. Why is that law important when deciding whether or not to watch

The benefits of capitalism are that the governments have limited control over other business, which lets business compete.

The amount of wealth that households and business desire to hold in the form of money balances is called the 'demand for money'. Individuals and firms have at their command only

Relate central banks with commercial banks In many countries, the central bank imposes reserve requirements. This means that commercial banks are obliged to hold a certain perc

Explain the adjustment to the new equilibrium price from an increase in supply.

how long will be the solution

How are individual makes choices? Fundamental principles behind the individual choices are as follows: 1. Resources are scarce . 2. The real cost of anything is what y