Question

2. Sketch an appropriately labelled diagram for a perfectly competitive firm that incurs loss in the short run and will shut down in the short run.

3. Answer using the accompanying total revenue schedule of Emerald, Inc., a producer of emeralds.

Quantity of emeralds - 1, 2, 3, 4, 5.

Total revenues - 100, 186, 252, 280, 250.

a) Calculate the demand schedule.  b) Calculate the marginal revenue schedule.  

c) Is the company a perfectly competitive firm or a monopoly? Why?

Answer 1

2.

3.

a. Since the demand schedule will be a table showing the quantity demanded of emeralds at different price levels, then there is a need to calculate the price levels corresponding to each quantity.

$Total Revenue= Price \times Quantity.$

Therefore,

$Price = \frac{Total Revenue}{Quantity}$

Using this equation, the demand schedule can be calculated as shown in the table below.

b. To calculate the marginal revenue schedule, its important to note that,

$Marginal\ revenue=\frac{Change in Revenue}{Change in Quantity}$

Marginal revenue can there be calculated from the total revenue schedule using this equation to generate the marginal revenue schedule as below:

c. The company is a perfectly competitive firm because its total revenue is a product of a given market price and the quantity of emeralds chosen by the company.