The Poster Bed Company believes that its industry can best be classified as monopolistically competitive. An analysis of the demand for its canopy bed has resulted in the following estimated demand function for the bed: P=1,760−12Q�=1,760−12� The cost analysis department has estimated the total cost function for the poster bed as TC=Q33−15Q2+5Q+24,000TC=�33−15�2+5�+24,000 Short-run profits are maximized when the level of output is and the price is .
The Poster Bed Company believes that its industry can best be classified as monopolistically competitive. An analysis of the demand for its canopy bed has resulted in the following estimated demand function for the bed: P=1,760−12Q�=1,760−12� The cost analysis department has estimated the total cost function for the poster bed as TC=Q33−15Q2+5Q+24,000TC=�33−15�2+5�+24,000 Short-run profits are maximized when the level of output is and the price is .
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter10: Prices, Output, And Strategy: Pure And Monopolistic Competition
Section: Chapter Questions
Problem 8E
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Question
The Poster Bed Company believes that its industry can best be classified as monopolistically competitive. An analysis of the demand for its canopy bed has resulted in the following estimated demand function for the bed:
P=1,760−12Q�=1,760−12�
The cost analysis department has estimated the total cost function for the poster bed as
TC=Q33−15Q2+5Q+24,000TC=�33−15�2+5�+24,000
Short-run profits are maximized when the level of output is
and the price is
.
The total profit at this price-output level is
.
The point price elasticity of demand at the profit-maximizing level of output is .
The level of fixed costs the firm is experiencing on its bed production is
.
What is the impact of a $5,000 increase in the level of fixed costs on the price charged, output produced, and profit generated?
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Increase
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No change
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Decrease
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|
|---|---|---|---|---|
| Price Charged |
|
|
|
|
| Output Produced |
|
|
|
|
| Profits Generated |
|
|
|
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