Drybar, a hair salon, has very loyal customers and faces a weekly demand for blowouts equal to qD = 1,040 – 20P. The salon has weekly total cost of TC(q)=0.05q2+20q+500. a) Ia diagram, draw drybar’s demand curve (PD). Write Drybar’s revenue as a function of the firm’s quantity. Compute the expression of Drybar’s Marginal Revenue and draw the MR curve in your. In the diagram, draw the MR curve. Note that it has twice the slope than demand. b) In the same diagram, illustrate drybar’s average total cost curve (ATC), and marginal cost curve (MC). If Drybar were a perfectly competitive firm, in the long run at what price would it sell its output?

Drybar, a hair salon, has very loyal customers and faces a weekly demand for blowouts equal to qD = 1,040 – 20P. The salon has weekly total cost of TC(q)=0.05q2+20q+500.

a) Ia diagram, draw drybar’s demand curve (PD). Write Drybar’s revenue as a function of the firm’s quantity. Compute the expression of Drybar’s Marginal Revenue and draw the MR curve in your. In the diagram, draw the MR curve. Note that it has twice the slope than demand.

b) In the same diagram, illustrate drybar’s average total cost curve (ATC), and marginal cost curve (MC). If Drybar were a perfectly competitive firm, in the long run at what price would it sell its output?

Drybar instead has market power. Suppos the firm charges all customers the same price for a blowout.

c) Find the profit maximizing level of output (q*) and price (p*). Compute the price elasticity of demand at q* and show that at q* MR(q*) = p*(1+1/e) = MC(q*) i) Compute the consumer surplus created by Drybar and the profit of the firm.