Question

Suppose that the marginal cost of mining gold is constant at $300 per ounce and the demand schedule is as follows:

Answer 1

Answer:

a) The price would be $300 and quantity would be 8000 oz

b) The price would be $700 and quantity would be 4000 oz

c) The price would be $700 and quantity would be 2000 oz each

d) The revenues of both firm would : increase ( for the firm that increase production ) and decrease ( for the firm that doesn't increase production)

Explanation:

marginal cost = $300

calculate the value of TR ( total revenue for each price and quantity given )

TR = price * quantity

also calculate the MR ( marginal revenue  for each )

MR = $\frac{change in TR }{change in quantity}$

For the first value : TR = $1000000 , MR = nil

For the second value : TR = $1800000 , MR = $800

For the third value : TR = $2400000. MR = $600

For the fourth value : TR = $2800000 , MR = $400

For the fifth value:  TR = $3000000 , MR = $200

For the sixth value : TR = $3000000, MR = $0

For the seventh value : TR = $2800000, MR = -$200

For the eighth value : TR = $2400000, MR = -$400

a)The price would be $300 and quantity would be 8000 oz because from the table above that is the point with highest  quantity supplied

b) The price would be $700 and quantity would be 4000 oz because the single supplier would put the price and quantity to be supplied at the point where marginal cost is closest to the marginal revenue

d) The revenues of both firm would : increase ( for the firm that increase production ) and decrease ( for the firm that doesn't increase production) this is because increase in production is directly proportional to increase in revenue .