MR and MC

jayj224

Hi Guys

Wounder if anybody would like to help me with a question I can't get my head around.Mods feel free to move/delete.

If Cost function is 1/2Q^2. Marginal Cost is Q through diferentiation.
But if Q is stated as Q: 1 - P.

Total Revenue can be moved around to result in Q-Q^2.
Leaving a differentiated Marginal Revenue of 1 - 2Q.

The question is if I am to plot or draw the marginal revenue and marginal cost curve. I will continue to get a negative MR Due to the way the function is constructed. Do i Ignore the negative while inputing numbers to draw the curves. Its a monoplosit.

Any Help would be much appreciated.

Time Magazine

jayj224 wrote: »

I will continue to get a negative MR Due to the way the function is constructed.

There's your problem. If
[latex]TR = Q - Q^2[/latex]
[latex]MR = 1 - 2Q[/latex]
which isn't negative over the entire range of numbers. What about when Q=0.1? Sure, it's downward-sloping, but it's supposed to be. It's not negative "where it counts".

I get a reasonable equilibrium.

jayj224

Time Magazine wrote: »

There's your problem. If
[latex]TR = Q - Q^2[/latex]
[latex]MR = 1 - 2Q[/latex]
which isn't negative over the entire range of numbers. What about when Q=0.1? Sure, it's downward-sloping, but it's supposed to be. It's not negative "where it counts".

I get a reasonable equilibrium.

Thanks Time Magazine, I understand MR should be downward sloping, I may have worded it wrong how would it be possible to have 0.1 of quantity as Q represents Qty all my examples have full figures.

Économiste Monétaire

MR = MC to solve for q*, then you can find P*. Pretty small graph though .

Time Magazine

jayj224 wrote: »

Thanks Time Magazine, I understand MR should be downward sloping, I may have worded it wrong how would it be possible to have 0.1 of quantity as Q represents Qty all my examples have full figures.

Quantities are often in thousands or millions.

Monopolists set MC=MR.

So we have

1-2Q = Q
1 = 3Q
3Q = 1
Q = 1/3.

I assume P = 1 - Q, then with Q=1/3, P = 2/3.

So the equilibrium would be, for example, P=€0.67 and 333 units are sold.

As yer man said, small graph

jayj224

Thanks for the help guys, you cleared everything up.