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A monopolistic firm produces goods in a market where the demand function is P = 43 – 0.30 and the corresponding total cost function is TC = 0.010' - 0.40 + 30. a) What can you say about the fixed costs of this firm? b) Find the (non-zero) output for which average cost is equal to marginal cost, and explain the significance of this value. c) Find the output which maximises profit and calculate the price clasticity of demand at this point.

A monopolistic firm produces goods in a market where the demand function is P = 43 – 0.30 and the corresponding total cost function is TC = 0.010' - 0.40 + 30. a) What can you say about the fixed costs of this firm? b) Find the (non-zero) output for which average cost is equal to marginal cost, and explain the significance of this value. c) Find the output which maximises profit and calculate the price clasticity of demand at this point.

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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A monopolistic firm produces goods in a market where the demand function is P= 43 – 0.30 and the corresponding total cost function is TC = 0.01Q' – 0.40 + 3Q. (a) What can you say about the fixed costs of this firm? (b) Find the (non-zero) output for which average cost is equal to marginal cost, and explain the significance of this value. (c) Find the output which maximises profit and calculate the price elasticity of demand at this point.
Transcribed Image Text:A monopolistic firm produces goods in a market where the demand function is P= 43 – 0.30 and the corresponding total cost function is TC = 0.01Q' – 0.40 + 3Q. (a) What can you say about the fixed costs of this firm? (b) Find the (non-zero) output for which average cost is equal to marginal cost, and explain the significance of this value. (c) Find the output which maximises profit and calculate the price elasticity of demand at this point.
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