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In Pullman there is only one fortune teller who acts as a monopoly. The inverse demand function for this service is given by P =

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In Pullman there is only one fortune teller who acts as a monopoly. The inverse demand function for this service is given by P = 9 - 2 , where P denotes the price charged per visit, and @ the quantity demanded for fortune telling. (a) Suppose the cost function of this fortune teller is given by C(Q) = 3 + Q. That is, the marginal cost is c = $1 (consisting of her value time and other "com- munication" expenses), and the fixed cost is F = $3 (say, monthly rent on her office space). Compute and draw the fortune teller's marginal cost and average functions, as well as the marginal revenue function. (b) Algebraically compute the fortune teller's profit-maximizing output, price, and profit. (c) Compute the price elasticity at the profit-maximizing output

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