A monopolist estimates its inverse demand function to equal
P = 2400 – 5Q.
In addition, it estimates its short-run total cost function to equal
TC = 2Q3 – 15Q2 + 400Q
and its marginal-cost function to equal
SMC = 6Q2 – 30Q + 400.
a) What is the firm’s total revenue function?
b) What is the firm’s marginal revenue function?
c) What is the firm’s profit maximizing output?
d) What price will the firm charge for this output?
e) What is the average total cost (ATC) of producing the profit maximizing output?
f) What is amount of the economic profit (loss) earned (incurred) by the firm?
g) What can you conclude about the firm’s use of its resources versus other options (or
alternate uses)?
h) Is this situation sustainable in the long-run? Why or why not?
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