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    Competitive Pricing

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    A software producer has fixed costs of $20,000 per month and her Total Variable Costs (TVC) as a function of output Q are given below:

    Q TVC Price
    2,000 $5,000 $20
    4,000 7,000 15
    6,000 18,000 10
    8,000 33,000 5
    10,000 50,000 1

    If software can only be produced in the quantities above,

    a) What should be the production level if the producer operates in a monopolistic competitive market where the price of software at each possible quantity is also listed above?

    b) What should be the production level if fixed costs rose to $70,000 per month?

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    Solution Preview

    I create two new colums, revenue (= Q X price) and profit before fixed cost (=revenue - TVC)

    Q TVC Price revenue profit before fixed cost
    2,000 ...

    Solution Summary

    Competitive Pricing; Production level in monopolistic competitive market