Economics: The Basics 1st Edition by Mike Mandel

Exercise 2

A small business makes 1970s-style lava lamps (see the accompanying picture). There aren't many competitors. The business can sell the first few lamps for $30 each, but the business owners have found that they need to reduce the price if they want to sell more.

a) Fill in the table with the revenue and marginal revenue for each level of output. (Marginal revenue is calculated here as the change in revenue divided by the change in quantity sold.)b) Graph the revenue function.
c) Suppose the marginal cost of making each lamp is $14. How many lamps should the business make to get the highest profit?