Take a shot. What do you think?
Hint: always always always, maximize profits where MC=MR.
Hint 2: Total revenue (TR) is P*Q
Ok well here is what I have so far:
MC (Q) = MR (Q) P = MC
P = 1000 – Q & C (Q) = 20,000 + 2Q2
MR = a + 2bQ
MR = 1000 – 2Q
MC = 4
1000 – 2Q = 4
6Q = 1000
Q = 167 units
= 20,000 + 2(167) ^2
MC = 668
MR = 666
P = $833
Profits are given by the difference between revenues and costs
= P*Q* - C (Q*)
= 833* 167 – 20,000 + 2(167) ^2
= 139,111 – 75,778
= $63,333 Profit
The marginal cost curve intersects the average total cost curve and the average variable cost curve at their minimum points. The reason is that ATC and AVC are averages of the cost of the first unit of output, the second unit, and so on. If the average is falling, the last unit must have a cost below the average, in order to be bringing down the average. If the average is rising, the last unit must have a cost above the average, in order to be bringing up the average
Due to the free entry of monopolistic markets, if we are earning a profit in the short run additional firms will probably enter the market too, in the long run to capture some of those profits. As new firms enter the market they will make different PC’s and offer other service plans, setting themselves apart from us. Some of our consumers will then use the newer firms PCs and substitute for our PC. As the demand curve decreases where it is just tangent to our average cost curve, we’ll be earning probably no profits and other firms won’t enter the market. So, for us to be successful over time we’ll have to charge a price that exceeds the MC of producing our PCs.
How close am I?
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