QUESTION
Suppose
that you are an owner of a company that produces a special weight-loss
over-the-counter medicine in a monopolistically competitive industry. The
demand and the total cost for your medicine per day are given by the following
table.
Quantity Demanded
Price
Total Cost
1
68
70
2
66
80
3
64
85
4
62
90
5
60
100
6
58
115
7
56
136
8
54
164
9
52
200
10
50
245
a.
Calculate Average Total Cost, Marginal Cost, Total Revenue, Marginal
Revenue, and Profit for each bottle of the medicine produced.
b.
How many bottles of this medicine should you produce in order to
maximize profit, and what are the market price and the corresponding profit?
c.
Suppose that you pay for an advertising flyer for a $100 flat fee and
after that the demand for the medicine increases (see the table below for the
new demand information). How do your answers in parts a. and b. change?
Quantity Demanded
Price
3
68
4
66
5
64
6
62
7
60
8
58
9
56
10
54
11
52
12
50
ANSWER:
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