Question is a leading Internet retailer of high-performance desktop computers. Based on an analysis of monthly cost and output data, the company has estimated the following relation between its marginal cost of production and monthly output:
MC = $100 + $0.005Q

A. Express output as a function of marginal cost. Calculate the level of output at which MC = $1,000, $1,500 and $2,000.
B. Calculate the profit-maximizing level of output if prices are stable in the industry at $1,500 per unit and, therefore, P = MR = $1,500.
C. Again assuming prices are stable in the industry; derive the firm's supply curve. Express price as a function of quantity and quantity as a function of price.

  • CreatedJuly 29, 2013
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