Suppose there?s an appliance store that sells air conditioners. It could set its price high and sell very few air conditioners, or it could set its price low and sell many more air conditioners. The following table shows some possible choices this store could make:

The graph below plots the firm?s total revenue curve: that is, the relationship between quantity and total revenue given by the two right columns in the table above. The five choices are also labeled. Finally, two black lines are shown; these lines are tangent to the green curve at points B and D.

Using the information on the slope of the lines tangent to the curve at points B and D, plot the slope of the total revenue curve on the graph below. (As it turns out, it?s a straight line, so the two points you plot will determine a line.)

Required:

The total revenue curve reaches its maximum at a quantity of (400, 200, 100, 300) air conditioners per year. At this point, the slope of the total revenue curve is (negative, equal to zero, positive, at its maximum, at its minimum)?

Transcribed Image Text:

A B с D E Price (Dollars per air conditioner) 400 300 200 100 0 Quantity (Air conditioners per year) 0 100 200 300 400 Total Revenue (P x Q) (Dollars per year) 0 30,000 40,000 30,000 0 TOTAL REVENUE (Thousands of dollars per year) 50 45 40 35 30 25 20 15 10 0 A 0 A 50 B D E 100 150 200 250 300 350 400 QUANTITY (Air conditioners per year) (G REVENUE (Dollars per air conditioner) 250 200 150 100 50 0 -50 -100 -150 -200 -250 to 50 100 150 200 250 300 QUANTITY (Air conditioners per year) 350 400 Slope of TR A B с D E Price (Dollars per air conditioner) 400 300 200 100 0 Quantity (Air conditioners per year) 0 100 200 300 400 Total Revenue (P x Q) (Dollars per year) 0 30,000 40,000 30,000 0 TOTAL REVENUE (Thousands of dollars per year) 50 45 40 35 30 25 20 15 10 0 A 0 A 50 B D E 100 150 200 250 300 350 400 QUANTITY (Air conditioners per year) (G REVENUE (Dollars per air conditioner) 250 200 150 100 50 0 -50 -100 -150 -200 -250 to 50 100 150 200 250 300 QUANTITY (Air conditioners per year) 350 400 Slope of TR

Answer rating: 100% (QA)

At point B the slope of the line 40000 20000 150 50 200 At point D the ... View the full answer