Managerial Economics

A monopolistically competitive firm has the following short-run inverse demand, marginal revenue, and cost schedules for a particular product:

P = $45 – $0.2Q

MR = $45 – $0.4Q

TC = $500 + $5Q

MC = $5

a) What quantity would maximize profits for this firm? (Hint: Recall that profit maximizing is where MR = MC)

b) At what price should this firm sell its product in order to maximize profits or minimize losses?

c)  What would be the amount of the firm’s total revenue at the quantity and price identified in parts “a” and “b” above?

d) What would be the amount of the firm’s profit (if positive number) or loss (if negative number) at the quantity and price identified in parts “a”, “b” and “c” above?

 
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