6. Exercise 10.8 The Poster Bed Company believes that its industry can best be classified as monopolistically competitive. An analysis of the demand for its canopy bed has resulted in the following estimated demand function for the bed: P = 3,005 - 10Q The cost analysis department has estimated the total cost function for the poster bed as TC = -15Q²+5Q +24,000 Short-run profits are maximized when the level of output is The total profit at this price-output level is $ The point price elasticity of demand at the profit-maximizing level of output is The level of fixed costs the firm is experiencing on its bed production is $ What is the impact of a $5,000 increase in the level of fixed costs on the price Price Charged Output Produced Profits Generated Increase 000 No change and the price is $ οιοι ο Decrease -0.02 -4.01 -0.10 output produced, and profit generated?

6. Exercise 10.8 The Poster Bed Company believes that its industry can best be classified as monopolistically competitive. An analysis of the demand for its canopy bed has resulted in the following estimated demand function for the bed: P = 3,005 - 10Q The cost analysis department has estimated the total cost function for the poster bed as TC = -15Q²+5Q +24,000 Short-run profits are maximized when the level of output is The total profit at this price-output level is $ The point price elasticity of demand at the profit-maximizing level of output is The level of fixed costs the firm is experiencing on its bed production is $ What is the impact of a $5,000 increase in the level of fixed costs on the price Price Charged Output Produced Profits Generated Increase 000 No change and the price is $ οιοι ο Decrease -0.02 -4.01 -0.10 output produced, and profit generated?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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6. Exercise 10.8
The Poster Bed Company believes that its industry can best be classified as monopolistically competitive. An analysis of the demand for its canopy bed.
has resulted in the following estimated demand function for the bed:
P= 3,005 10Q
The cost analysis department has estimated the total cost function for the poster bed as
TC=¹-15Q² +5Q+ 24,000
Short-run profits are maximized when the level of output is
The total profit at this price-output level is $
The point price elasticity of demand at the profit-maximizing level of output is
The level of fixed costs the firm is experiencing on its bed production is $
What is the impact of a $5,000 increase in the level of fixed costs on the price
Price Charged
Output Produced
Profits Generated
Increase No change
O
O
Το ο
and the price is $
Decrease
OO
-0.02
-4.01
-0.10
output produced, and profit generated?

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Step 1: Monopolistic competition:

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Step 2: Profit-maximizing price and output:

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Step 3: Total profit:

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Step 4: Point elasticity:

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Step 5: Fixed cost:

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Step 6: Effect of change in fixed cost:

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