Mr. Kamran Ali is building houses in Karachi. He has analyzed the market carefully, and he knows that at a price of Rs.12,000,000. (Rs.12 million) he will sell 8 houses per year. In addition, he knows that at any price above Rs.12,000,000. (Rs.12 million), no one will buy his houses because the government provides equal-quality houses to anyone who wants one at Rs.12,000,000. (Rs.12 million). He also knows that for every Rs.2,000,000. (Rs.2 million), he lower his price, he will be able to sell an additional 2 units. For example, at a price of Rs.10,000,000. (Rs.10 million), he can sell 10 houses; at a price of Rs.8,000,000. (Rs.8 million), he can sell 12 houses; and so on. Sketch the demand curve that Mr. Kamrans’ firm faces. Sketch the effective marginal revenue curve that his firm faces. If the marginal cost of building a house is Rs.10,000,000. (Rs.10 million), how many will he build and what price will he charge? What if MC = Rs.8,500,000. (Rs.8.5 million)?
Mr. Kamran Ali is building houses in Karachi. He has analyzed the market carefully, and he knows that at a price of Rs.12,000,000. (Rs.12 million) he will sell 8 houses per year. In addition, he knows that at any price above Rs.12,000,000. (Rs.12 million), no one will buy his houses because the government provides equal-quality houses to anyone who wants one at Rs.12,000,000. (Rs.12 million). He also knows that for every Rs.2,000,000. (Rs.2 million), he lower his price, he will be able to sell an additional 2 units. For example, at a price of Rs.10,000,000. (Rs.10 million), he can sell 10 houses; at a price of Rs.8,000,000. (Rs.8 million), he can sell 12 houses; and so on. Sketch the demand curve that Mr. Kamrans’ firm faces. Sketch the effective marginal revenue curve that his firm faces. If the marginal cost of building a house is Rs.10,000,000. (Rs.10 million), how many will he build and what price will he charge? What if MC = Rs.8,500,000. (Rs.8.5 million)?
Microeconomics: Principles & Policy
14th Edition
ISBN:9781337794992
Author:William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:William J. Baumol, Alan S. Blinder, John L. Solow
Chapter4: Supply And Demand: An Initial Look
Section: Chapter Questions
Problem 2DQ
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Mr. Kamran Ali is building houses in Karachi. He has analyzed the market carefully, and he knows that at a price of Rs.12,000,000. (Rs.12 million) he will sell 8 houses per year. In addition, he knows that at any price above Rs.12,000,000. (Rs.12 million), no one will buy his houses because the government provides equal-quality houses to anyone who wants one at
Rs.12,000,000. (Rs.12 million).
He also knows that for every Rs.2,000,000. (Rs.2 million), he lower his price, he will be able to sell an additional 2 units. For example, at a price of Rs.10,000,000. (Rs.10 million), he can sell 10 houses; at a price of Rs.8,000,000. (Rs.8 million), he can sell 12 houses; and so on.
- Sketch the demand curve that Mr. Kamrans’ firm faces.
- Sketch the effective marginal revenue curve that his firm faces.
- If the marginal cost of building a house is Rs.10,000,000. (Rs.10 million), how many will he build and what price will he charge? What if MC = Rs.8,500,000. (Rs.8.5 million)?
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