Pharmed Caplets is an antibiotic product with monthly revenues and costs of TR $900Q $0 1Q 2 TC $36,000 $200Q $0 4Q 2 MR TR Q $900 $0 2Q MC TC Q $200 $0 8Q A Set up a spreadsheet for output (Q), price (P), total revenue (TR), marginal revenue (MR), total cost (TC), marginal cost (MC), average cost ...

Pharmed Caplets is an antibiotic product with monthly revenues and costs of: TR = $900Q - $0.1Q

Question:

Pharmed Caplets is an antibiotic product with monthly revenues and costs of:

TR = $900Q - $0.1Q^{2 ………………………………}TC = $36,000 + $200Q + $0.4Q²

MR = ∂TR/∂Q = $900 - $0.2Q ^{…………………}MC = ∂TC/∂Q = $200 + $0.8Q

A. Set up a spreadsheet for output (Q), price (P), total revenue (TR), marginal revenue (MR), total cost (TC), marginal cost (MC), average cost (AC), total profit (π), and marginal profit (Mπ). Establish a range for Q from 0 to 1,000 in increments of 100 (i.e., 0, 100, 200, ..., 1,000).

B. Using the spreadsheet to, create a graph with MR, MC, and AC as dependent variables and units of output (Q) as the independent variable. At what price/output combination is total profit maximized? Why? At what price/output combination is average cost minimized? Why?

C. Determine these profit-maximizing and average-cost minimizing price/output combinations analytically. In other words, use revenue and cost equations to confirm your answers to part B.

D. Compare the profit-maximizing and average-cost minimizing price/output combinations, and discuss any differences. When will average-cost minimization lead to long-run profit maximization?