Draw the Marginal Revenue function and find Profit Max Price?

Question

I'm awful at economics...maybe someone can help me!

I drew my graph here (using MS Paint):

http://imgbin.org/index.php?page=image&id=135

Now, I need to draw the marginal revenue function? How should I draw that? Then find the profit maximization price? AND show the area that represents the net loss?

Any help would be awesome, thank you!! =)

Answer 1

Unless you were given a function, the marginal revenue curve is just a downward sloping line below the demand curve.  It starts at the point where the demand curve hits the price axis, and continues down, at a steeper slope than the demand curve.

To find the price, first find the point where the marginal revenue curve hits the marginal cost curve.  Then go up (or down) at that quantity to find where it hits the demand curve.  The profit or loss is the area between the price and the average total cost.