A hair salon has very loyal customers and faces a weekly demand for blowouts equal to qD = 1,040 – 20P. The salon has weekly total cost of TC(q)=0.05q2+20q+500. g) The hair Salon instead has market power. Suppos the firm charges all customers the same price for a blowout. Find the profit maximizing level of output (q*) and price (p*). h) Compute the price elasticity of demand at q* and show that at q* MR(q*) = p*(1+1/e) = MC(q*) i) Compute the consumer surplus created by the Salon and the profit of the firm.

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