Dr. Jeraisy, a well-known plastic surgeon, has a reputation for being one of the best surgeons for reconstructive nose surgery. Dr. Jeraisy enjoys a rather substantial degree of market power in this market. She has estimated demand for her work to be:
Q = 480 – 0.2P
Where Q is the number of nose operations performed monthly and P the price of a nose operation.
• What is the inverse demand function for Dr. Jeraisy’s services?
• What is the marginal revenue function?
The average variable cost function for reconstructive nose surgery is estimated to be: AVC = 2Q2 – 15Q + 400
Where AVC is average variable cost (measured in dollars) and Q is the number of operations per month. The doctor’s fixed costs each month are US$8000
• If the doctor wishes to maximize her profit, how many nose operations should she perform each month?
• What price should Dr. Jeraisy charge to perform a nose operation?
• How much profit does she earn each month?
1 answer