Statistics Solutions

(See Steps) A monopoly firm faces the following estimated demand and average variable cost functions: Q = 800,000 - 2,000P + 0.7M + 4,000P R AVC = 500 -

Question: A monopoly firm faces the following estimated demand and average variable cost functions:

Q = 800,000 – 2,000P + 0.7M + 4,000P R

AVC = 500 – 0.03Q + 0.000001Q 2

Where Q is quantity, P is price, M is income, and P R is the price of a related good.

The firm expects income to be $40,000 and P R to be $53. Total fixed cost is $2,6000,000.

  1. Determine whether the firm should produce or shut down. Show how this decision was made.
  2. If the firm produces, what is the profit maximizing level of output and the price it should charge?
  3. What will be the firm’s profit?

Price: $2.99
Solution: The downloadable solution consists of 2 pages
Deliverable: Word Document


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