Rod N. Reel owns a dealership that sells fishing boats in an open price-searcher market. To develop his pricing strategy, Rod hired an economist toestimate his demand curve. The first two columns of the chart provide the data for the expected weekly quantity demanded for Rod's fishing boats atalternative prices. Rod's marginal (and average) cost of supplying each boat is constant at $7,000 per boat, no matter how many boats he sells perweek in this range. This cost includes all opportunity costs and represents the economic cost per boat.Complete the following table by finding the total revenue and total cost per week at each quantity, the marginal revenue and marginal cost from thesale of each additional boat, and the economic profit per week at each quantity.Price of FishingBoats$9,000$8,000$7,000$6,000$5,000$4,000Fishing BoatsSold(Boats per Week)012345TrueTotalRevenue($ per Week)$$$$$If Rod wants to maximize his profits, he should charge a price ofprofit-maximizing price.At this price and sales volume, Rod's profits per week will be $$0MarginalRevenue($ per Week)AAAAA$$$$$Total Cost($ perWeek)$$$$$$0MarginalCost($ per week)per boat. At this price, Rod will sell$7,000$7,000$7,000$7,000$7,000EconomicProfit($ per Week)$$$$$boats per week at the$0True or False: At the price and sales level where profits are maximized, Rod has sold all boats that have higher marginal revenue than marginal cost. $5,000$4,000If Rod wants to maximize his profits, he should charge a price ofprofit-maximizing price.45At this price and sales volume, Rod's profits per week will be $True$$FalseThese profits will induce firms toRod's profits are typical of all firms in the boat sales business.MA$True or False: At the price and sales level where profits are maximized, Rod has sold all boats that have higher marginal revenue than marginal cost.As Rod lowers his price from $9,000 to $5,000 his total revenues keepprices.the industry until economic profits are eliminated.When Rod lowers his price from $5,000 to $4,000, his total revenueprices.per boat. At this price, Rod will sell$Recall the relationship between elasticity of demand, price changes, and their impact on total revenues.Thus, demand is.$7,000$7,000Thus, demand is$$boats per week at theover this range ofbetween these two

Total Revenue (TR) can be calculated by multiplying the given price function with quantity as…

Rod N. Reel owns a dealership that sells fishing boats in an open price-searcher market. To develop his pricing strategy, Rod hired an economist to estimate his demand curve. The first two columns of the chart provide the data for the expected weekly quantity demanded for Rod's fishing boats at alternative prices. Rod's marginal (and average) cost of supplying each boat is constant at $7,000 per boat, no matter how many boats he sells per week in this range. This cost includes all opportunity costs and represents the economic cost per boat. Complete the following table by finding the total revenue and total cost per week at each quantity, the marginal revenue and marginal cost from the sale of each additional boat, and the economic profit per week at each quantity. Price of Fishing Boats $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 Fishing Boats Sold (Boats per Week) 0 1 2 3 4 5 True Total Revenue ($ per week) $ $ $ $ $ If Rod wants to maximize his profits, he should charge a price of profit-maximizing price. At this price and sales volume, Rod's profits per week will be $ $0 Marginal Revenue ($ per week) $ $ $ $ $ Total Cost ($ per Week) $ $ $ $ $ $0 Marginal Cost ($ per Week) $7,000 $7,000 $7,000 $7,000 $7,000 Economic Profit ($ per Week) $ $ $ $ $ per boat. At this price, Rod will sell boats per week at the $0 True or False: At the price and sales level where profits are maximized, Rod has sold all boats that have higher marginal revenue than marginal cost.

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter23: Price-searcher Markets With Low Entry Barriers

Section: Chapter Questions

Problem 17CQ