(Table: Demand for Crude Oil) The table Demand for Crude Oil shows the demand schedule for crude oil.The marginal cost of producing crude oil equals zero.If the crude oil industry is a monopoly, the price of crude oil will be , the total quantity of crude oil produced by the
Monopoly will be ________ barrels, and the monopoly will earn revenue equal to _.

Question

Quizplus · Accepted Answer

The marginal cost of producing crude oil equals zero, so the monopoly will produce at the quantity where marginal revenue equals zero. The marginal revenue curve is the derivative of the total revenue curve, which is the product of price and quantity. The total revenue curve is a parabola, so the marginal revenue curve is a straight line with a slope equal to the price. The marginal revenue curve intersects the x-axis at the quantity where total revenue is maximized. This quantity is 80 barrels. The price at this quantity is $80. The monopoly will earn revenue equal to $6,400.

(Table: Demand for Crude Oil) the Table Demand for Crude