Consider two freely available goods, X and Y. (i) For any given consumer of X and Y, what will his/her indifference curves look like? Clearly show the direction of preference. (ii) Suppose now, that good X becomes costly and is priced (by regulation) at PX = 170 per unit. A firm that wishes to sell commodity X in the market faces a total cost of TC = 100 + 10X + 16X2, which indicates that his marginal cost function is MC = 10 + 32X. Given the price of X, the firm’s total revenue is TR = 170X, and his marginal revenue function is MR = 170. Calculate the firm’s profit.

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i Indifference curves represent combinations of goods that provide a consumer with the same level of ... View the full answer