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Calculation Of Total And Marginal Revenue Function Of Monopolistic Firm

Question

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?


Summary

The question belongs to Economics and it is about calculation of a monopolist firm’s total revenue function, marginal revenue function, profit maximizing output, the price charged by the firm, etc. All these questions have been answered in detail in the solution.

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Comments

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