Freaky Fast Oil Change (FF) has many competitors in the metro area. It is relatively easy to enter this market. Competitors have varying quality of service and convenience of location for oil change customers. FF has the following short-run daily demand and cost functions for oil changes, where Q is the number of oil changes demanded per day and P is the price per oil change. The total cost function includes all explicit and implicit costs of production.

P = 40 - 0.2Q

TC = 2500 + 4Q

1. Define marginal cost. Find FF's marginal cost function.
2. Define average total cost. Find FF's average total cost function.
3. Define marginal revenue. What is the marginal revenue function for FF?
4. What price should FF set for an oil change? Compute its economicprofit or loss at this price.
5. What is the market structure in which FF operates? Based on this, and FF's short run demand and cost structures, what managerial advice would you give FF regarding its pricing if it remains in this market. Explain, using economic concepts, including the price elasticity of demand.