Author Question: What does the marginal revenue equal when a monopoly's total revenue is maximized? What is the ... (Read 138 times)

audragclark · **on:** Jun 29, 2018

What does the marginal revenue equal when a monopoly's total revenue is maximized? What is the elasticity of demand when the total revenue is maximized?

What will be an ideal response?

Question 2

Assume the government is concerned about the high price of Atlantic Red Crab and announces that it is going to shorten the fishing season to one week.

What impact will this have on the quantity of crab caught and the price of crab? Will this actually result in greater protection of the Atlantic Red Crab?

peter · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

When the total revenue is at its maximum, the marginal revenue equals 0 and the elasticity of demand equals 1.

Answer to Question 2

It is likely to lead to a race to fish as many of the fisherman know that they much catch as much fish as they can during the shorter season. The price of the crab is also likely to rise as the cost of catching them has gone up. In fact fishermen may employ more workers to get the job done and may even have to fish in inhospitable conditions to catch the crab. This may require that they pay the fishermen more money. This is not likely to result in greater protection of the Atlantic Red Crab.