YZ
Answered
Describe the difference between average revenue and marginal revenue. Why are both of these revenue measures important to a profit-maximizing firm?
On Jul 25, 2024
Average revenue is total revenue divided by the quantity of output. Marginal revenue is the change in total revenue from the sale of each additional unit of output. Marginal revenue is used to determine the profit-maximizing level of production, and average revenue is used to help determine the level of profits. Note that for all firms, price equals average revenue because AR=(PxQ)/Q=P. But only for a firm operating in a perfectly competitive industry does price also equal marginal revenue.
YZ
Answered
Refer to Table 17-10. Briefly explain why each duopolist earns a lower profit at the Nash equilibrium than if they cooperated to produce the monopoly output.
On May 25, 2024
The monopoly outcome occurs at the highest total profit level of Q=6, P=$6, total profit=$36, and each duopolist earns $18. As each duopolist tries to produce a slightly higher level of output to earn higher profits than half of the monopoly-output profits, total quantity produced in the market increases, which lowers market price.