A company is a monopolist.
The demand function for its product is as follows:
Q = 60 – 0.4P + 6Y + 2A
Where Q = quantity sold in units
P = Price per unit
Y = per capita disposal income (thousands of dollars)
A = hundreds of dollars of advertising expenditures
The firm’s average variable cost function is
AVC = Q2 – 10Q + 60
Y = 3 (thousand) and
A = 3 (hundred) for the period being analyzed.
A. If fixed costs are equal to $1,000, derive the firm’s total cost function and marginal cost function.
C(q) = fixed costs + variable cost
B. Derive a total revenue function and marginal revenue function for the firm.
C. Calculate the profit maximizing level of output and price for the firm.
D. What will the profit be?
2 answers