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Estimate the average cost, marginal cost, profits and graph the equilibrium.

Given the subsequent production information of a monopolistic company:
Output level = 100 units
Average variable cost = $10/unit
Total fixed cost = $400

The company is producing at the minimum point of its average cost curve

a) At this output level compute the average cost and the marginal cost.

b) Draw a diagram showing the current situation of the company.

c) In addition to the above information, suppose the price of the output is $13/unit, if the company wants to maximize its profit, illustrate what should it do? describe in detail with the aid of a diagram.

d) Suppose the price of the output is $16/unit instead, if the company wants to maximize its profit, illustrate what should it do? describe in detail with the aid of a diagram.

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M917401

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