A firm with market power faces the following estimated demand and average variable cost functions: Qd = 39,000 - 500P + 0.4M - 8,000PR AVC= 30 -0.005Q + 0.000000502 where Qd is quantity demanded, P is price, M is income, and PR is the price of a related good. The firm expects income to be $40,000 and PR to be $2. Total fixed cost is $100,000. What is the firm's profit? A. $220,000 B. $147,000

A firm with market power faces the following estimated demand and average variable cost functions: Qd = 39,000 - 500P + 0.4M - 8,000PR AVC= 30 -0.005Q + 0.000000502 where Qd is quantity demanded, P is price, M is income, and PR is the price of a related good. The firm expects income to be $40,000 and PR to be $2. Total fixed cost is $100,000. What is the firm's profit? A. $220,000 B. $147,000

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

A firm with market power faces the
following estimated demand and
average variable cost functions:
Qd = 39,000 - 500P + 0.4M - 8,000PR
AVC = 30 - 0.005Q + 0.0000005Q2
where Qd is quantity demanded, P is
price, M is income, and PR is the price
of a related good. The firm expects
income to be $40,000 and PR to be $2.
Total fixed cost is $100,000. What is
the firm's profit?
A. $220,000
B. $147,000
C. $120,000
D. $335,000

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