9781118041581

Sensitivity Analysis 49

FIGURE 2.9

Shifts in Marginal

Revenue and Marginal

Cost

Part (b) depicts an

increase in marginal

cost as an upward shift

in the marginal cost

curve. As a result, the

firm’s optimal output

level declines. Part (c)

shows an upward

(rightward) shift in

marginal revenue

resulting from an

increase in demand. As

a result, the firm’s

optimal output level

increases.

150

100

50

(a) Marginal Revenue and Cost (Thousands of Dollars)

3.3

Quantity (Lots)

MR = 170 – 40Q

MC = 38

150

100

50

(b) Marginal Revenue and Cost (Thousands of Dollars)

3.3

Quantity (Lots)

MR = 170 – 40Q

MC = 38

150

100

50

(c) Marginal Revenue and Cost (Thousands of Dollars)

3.3

Quantity (Lots)

MR = 190 – 40Q

MC = 38

MC = 46

3.1

3.8

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