1. (42 total points) Suppose that a monopolistically competitive firm must build
ID: 1099777 • Letter: 1
Question
1. (42 total points) Suppose that a monopolistically competitive firm must build a production facility in order to produce a product. The fixed cost of this facility is FC = $24. Also, the firm has constant marginal cost, MC = $3. Demand for the product that the firm produces is given by P = 27-3Q.
a) (27 points) Fill in the table below. If any of your values have decimals, you may round to only one numeral after the decimal (nearest 10th of a dollar).
Quantity of Output
Price
Total Cost
Average Total Cost
Total Revenue
Profits
1
2
3
4
5
6
7
8
9
b) (10 points) How much output will this firm produce if it maximizes profit?
c) (5 points) What price should this firm charge if it wants to maximize profit?
Quantity of Output
Price
Total Cost
Average Total Cost
Total Revenue
Profits
1
2
3
4
5
6
7
8
9
Explanation / Answer
Produce 4 units and sell at $15/unit
1 24 27 27 24 (3) 2 21 30 15 42 12 3 18 33 11 54 21 4 15 36 9 60 24 5 12 39 7.8 60 21 6 9 42 7 54 12 7 6 45 6.4 42 (3) 8 3 48 6 24 (24) 9 0 51 5.7 0 (51)Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.