Turn on thread page Beta
    • PS Reviewer
    Offline

    19
    ReputationRep:
    PS Reviewer
    (Original post by rg2005)
    when is it ever positive

    you have a downward sloping demand curve which shows when price decreases, quantity increases or vice versa so the PED formula would show a positive from quantity demanded divided by a negative from fall in price which equals a negative answer, i.e +/-=- so PED can never be greater than 1 meaning C is incorrect
    I think the question was referring to the magnitude of the PED.

    In any case there are some situations where the PED is in fact positive, and there is a 'perverse' demand curve. A couple of possible examples are rare pieces of art which have 'snob value' and shares due to speculation.
    Offline

    0
    ReputationRep:
    fair enough i didnt know that and it makes sense but i dont think the question is referring to the magnitude, i think its referring to the actual PED and edexcel cannot expect people to know that in rare cases the demand curve slopes upwards
    Offline

    2
    ReputationRep:
    (Original post by rg2005)
    wrong PED is always negative

    it must be refering to absolute magnitude a bummer i know
    • PS Reviewer
    Offline

    19
    ReputationRep:
    PS Reviewer
    (Original post by rg2005)
    a unit 4 question that to me does not have an answer

    Assume that a monopoly produces a profit maximising level of output. Which of the
    following statements is true for such a firm?

    A) At the profit maximizing level of output marginal profit will be positive
    B) At the profit maximizing level of output marginal revenue equals zero
    C) At the profit maximizing level of output the price elasticity of demand will be greater
    than one
    D) The firm will necessarily be making supernormal profits
    E) Raising output will reduce the firm’s revenue
    I think the answer is E.

    At the profit maximising level of output MC=MR, MR is not going to be zero, therefore raising output will add to total revenue as marginal revenue is more than zero.
    Offline

    2
    ReputationRep:
    (Original post by alex_hk90)
    I think the answer is E.

    At the profit maximising level of output MC=MR, MR is not going to be zero, therefore raising output will add to total revenue as marginal revenue is more than zero.



    guys, i promise you the answer is C, but do continue

    ps. i'm not saying i know why it's C, lol
    Offline

    2
    ReputationRep:
    I think I remember doing this paper, and I do believe Alex is right. C is a nonsense answer.
    • PS Reviewer
    Offline

    19
    ReputationRep:
    PS Reviewer
    (Original post by alex_hk90)
    I think the answer is E.

    At the profit maximising level of output MC=MR, MR is not going to be zero, therefore raising output will add to total revenue as marginal revenue is more than zero.
    Wait, I misread the question.
    I thought it said "Raising output will raise the firm’s revenue". :p:
    Offline

    2
    ReputationRep:
    Oh, it's A. It'll always be positive at the profit maximising point as profit maximisation = MC = MR, and marginal costs can't be 0<, so MR must be >0.
    • PS Reviewer
    Offline

    19
    ReputationRep:
    PS Reviewer
    (Original post by well_tempered)
    guys, i promise you the answer is C, but do continue

    ps. i'm not saying i know why it's C, lol
    You've got the mark scheme?

    It's either C or D.
    • PS Reviewer
    Offline

    19
    ReputationRep:
    PS Reviewer
    (Original post by Dan-IW)
    Oh, it's A. It'll always be positive at the profit maximising point as profit maximisation = MC = MR, and marginal costs can't be 0<, so MR must be >0.
    It's not A, because that's refering to "marginal profit".
    Offline

    2
    ReputationRep:
    Oh sorry, my bad.
    Offline

    13
    ReputationRep:
    It's C by elimination, none of the others are right.

    To see why it's not D, consider the case of a natural monopolist (and the reasons why a natural monopoly exists)
    • PS Reviewer
    Offline

    19
    ReputationRep:
    PS Reviewer
    (Original post by Apagg)
    It's C by elimination, none of the others are right.

    To see why it's not D, consider the case of a natural monopolist (and the reasons why a natural monopoly exists)
    You're right, it can't be any of the others, but I don't think C is necessarily correct either. :confused:
    Offline

    2
    ReputationRep:
    Okay, I think I understand why. It's a 'Point Elasticity of Demand' question. When MR = 0, PED = 1. Therefore as '[MR] will always be positive at the profit maximising point as profit maximisation = MC = MR, and marginal costs can't be 0<, so MR must be >0' Meaning that any point above MR = 0, PED = >1.

    I think that's right, sorry for the stupidity.
    Offline

    2
    ReputationRep:
    (Original post by alex_hk90)
    You've got the mark scheme?

    It's either C or D.



    It was in Gravelle & Rees, Microeconomics, stuck out like a sore thumb
    Offline

    0
    ReputationRep:
    (Original post by Dan-IW)
    Okay, I think I understand why. It's a 'Point Elasticity of Demand' question. When MR = 0, PED = 1. Therefore as '[MR] will always be positive at the profit maximising point as profit maximisation = MC = MR, and marginal costs can't be 0<, so MR must be >0' Meaning that any point above MR = 0, PED = >1.

    I think that's right, sorry for the stupidity.
    your sort of right except PED is negative most of the time so it cannot be >1, if the answer said <-1 then it would make sense
    Offline

    13
    ReputationRep:
    (Original post by rg2005)
    your sort of right except PED is negative most of the time so it cannot be >1, if the answer said <-1 then it would make sense
    It is common practice to refer to the absolute value of the PED
    Offline

    9
    ReputationRep:
    Whats the effect of the removal of an indirect tax upon the market for a product?
    the opposite effect of the introduction of an indirect tax?!
    Offline

    2
    ReputationRep:
    (Original post by Inquilaab)
    Whats the effect of the removal of an indirect tax upon the market for a product?
    the opposite effect of the introduction of an indirect tax?!

    It wants to know the burden of the tax, who pays for this tax? Either the consumer or the firm, the elasticity of supply will tell you.
    Offline

    0
    ReputationRep:
    could someone tell me why higher interest rates leads to lower AD for pounds??what happens to the AS for pounds???

    i know that higher interest rates would attract hot money inflows, but wouldn't that increase the demand for pounds???shifting AD outwards???
 
 
 
Reply
Submit reply
Turn on thread page Beta
Updated: October 11, 2018

University open days

  • University of Bradford
    All faculties Undergraduate
    Wed, 21 Nov '18
  • Buckinghamshire New University
    All Faculties Postgraduate
    Wed, 21 Nov '18
  • Heriot-Watt University
    All Schools Postgraduate
    Wed, 21 Nov '18
Poll
Black Friday: Yay or Nay?

The Student Room, Get Revising and Marked by Teachers are trading names of The Student Room Group Ltd.

Register Number: 04666380 (England and Wales), VAT No. 806 8067 22 Registered Office: International House, Queens Road, Brighton, BN1 3XE

Write a reply...
Reply
Hide
Reputation gems: You get these gems as you gain rep from other members for making good contributions and giving helpful advice.