Monopolist Question

wxvzyvat1216
timer Asked: Jun 1st, 2015

Question Description

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?


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