Macro Sound's is a monopolistic firm of producing headphones. Fixed daily cost of production is $1800. The production of each extra headphone is a constant of $28. From the experiences, it is known that if the price of its headphones is set at $100, nothing is sold. And for each $12 cut in price, quantity sold increased by 60 a day. This relationship continues to hold until price reduces to $16.
(a) By referring to the above information, construct a table to show the demand schedule for the price level adjusted down from $100, and the corresponding average total cost of production and profit. Also draw
an appropriate diagram for Marco Sound's demand curve, average total cost curve, marginal cost curve and marginal revenue curve.
(b) What quantity of headphone Marco Sound's produces to maximize its profit? What price should it charge?
(c) With reference to (a) and (b), what is Macro Sound's short-run economic profit or loss?
(d) In the long run, what will happen (explain in words, and no need to present any calculation) to the demand for Macro Sound's (1) the quantity of headphone sold, (2) the price charged, and (3) the economic profit?