You are a self-employed accountant who owns Budget Tax Prep, which specializes in tax preparation services. There are many competitors in your industry who offer a similar service, but quality of service varies among competitors. Entry into this industry is relatively easy. Your company's daily demand curve and cost functions, including your own opportunity costs, are currently (with Q being number of tax returns processed per day): Demand: P(Q) = 100 - 4Q Total Fixed Costs: TFC = 60 Total Variable Costs: TVC(Q) = (8.5)Q2 Marginal Costs: MC(Q) = 17Q A. Find your company's profit maximizing output and price using any method you wish. B. Calculate the level of total profit or loss per period that would accrue to the firm under the output and price determined in (a). C. What might happen to your profits over time, given the characteristics of your market described above.
You are a self-employed accountant who owns Budget Tax Prep, which specializes in tax preparation services. There are many competitors in your industry who offer a similar service, but quality of service varies among competitors. Entry into this industry is relatively easy. Your company's daily
Demand: P(Q) = 100 - 4Q
Total Fixed Costs: TFC = 60
Total Variable Costs: TVC(Q) = (8.5)Q2
Marginal Costs: MC(Q) = 17Q
A. Find your company's profit maximizing output and
B. Calculate the level of total profit or loss per period that would accrue to the firm under the output and price determined in (a).
C. What might happen to your profits over time, given the characteristics of your market described above.
Step by step
Solved in 2 steps
