# Demand Curve and Total Cost Curve

Please study these, you will see them again.

1. Question 1 - 4 using the information presented in question 1.

A monopoly faces the following demand curve and total cost curve:

Q = 2400 -100P

TC = 150,000 + 6Q.

Find the profit maximizing level of price

a. P = $15

b. P = $16

c. P = $17

d. P = 19

2. Find the profit maximizing output:

a. Q = 100 units

b. Q = 900 units

c. Q = 1000 units

d. Q = 90 units

e. cannot be derived

3. The total cost (TC) of the monopolist corresponding to the profit maximizing level of output is:

a. $150,000

b. $206,000

c. $155,400

d. impossible to determine with the given information

e. $200,000

4. The average total cost (ATC)of the firm corresponding to the profit maximizing level of output is:

a. $166.66

b. $132.32

c. $160

d. $172.66

5 . In the long run, new firms will keep entering a monopolistically competitive industry:

a. provided economies of scale are being realized.

b. even though losses are incurred in the short run.

c. until minimum average total cost is achieved.

d. until economic profits are zero.

https://brainmass.com/economics/price-levels/demand-curve-and-total-cost-curve-36019

#### Solution Preview

1. Questtion 1 - 4 using the information presented in question 1.

A monopoly faces the following demand curve and total cost curve:

Q = 2400 -100P

TC = 150,000 + 6Q. Find the profit maximizing level of price

a. P = $15

b. P = $16

c. P = $17

d. P = 19

The demand curve can be written into

P=24 - 0.01 Q

Then total revenue is

TR = P*Q = (24 - 0.01 Q)*Q = 24Q - 0.01 Q^2

So marginal revenue is

MR = dTR / dQ = 24 - 0.02Q

From TC = 150,000 + 6Q we calculate ...

#### Solution Summary

In the long run, new firms will keep entering a monopolistically competitive industry:

a. provided economies of scale are being realized.

b. even though losses are incurred in the short run.

c. until minimum average total cost is achieved.

d. until economic profits are zero.

Managerial economics

2. Assume the above graph depicts a firm that tries to maximize profits or minimize losses. Also assume this firm has a Total Cost Equation of 150 + 20Q + .5Q2, and a demand curve that can be described by the equation P = 60 -1Q Answer the following questions on the above firm, and show your work to receive full credit.

A. How much are the firm's Fixed Costs?

B. Assuming this firm's operates at its profit-maximizing output, what is that quantity of output?

C. At its profit-maximizing output, what is the firm's profit or loss?

D. The firm has a marginal cost equation that is shown above as MC=$20+$1Q. Suppose something happens to cause that equation to change to MC=$22+$1Q. How does this change in the firm's cost structure impact its profit-maximizing output and price? What practical implications for the firm's customers does your answer have?