Suppose that you estimate the following cost function for your company, v operating in a monopolistically competitive market: TC = 240Q – 12Q² + 0.2Q³ You also estimate the following demand curve for the output you are produ P = 180 – 6Q Derive the equations for average cost and marginal cost curyes

Suppose that you estimate the following cost function for your company, v operating in a monopolistically competitive market: TC = 240Q – 12Q² + 0.2Q³ You also estimate the following demand curve for the output you are produ P = 180 – 6Q Derive the equations for average cost and marginal cost curyes

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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.
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what is monopolistic competition? (50 WORDS)
A9