What are the firm marginal and average revenue product

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Reference no: EM13151832

Suppose that a firm that is a perfect competitor in its output market can vary only input Z in the short run and that AP(z)=80-z and MP(z)=120-z

a. Suppose that the price of the firm’s product is $20. What are the firm’s marginal and average revenue product functions? What is the firm’s short-run demand function for input Z? How much input Z will the firm use when the price is $40? When the price is $80?

b. Show that the results in (a) are consistent with the profit-maximizing rule in the firm’s output market: Produce the level of output where Short-run Marginal Cost is equal to output price.

Reference no: EM13151832

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