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Suppose that you estimate the following cost function for your company, which is a firm operating in a monopolistically competitive market: TC = 180Q -

Suppose that you estimate the following cost function for your company, which is a firm operating in a monopolistically competitive market:

TC = 180Q - 8Q2 + 0.5Q3

You also estimate the following demand curve for the output you are producing.

P = 360 - 8Q

  1. Derive the equations for average cost and marginal cost curves.
  2. Over what range of output does economies of scale exist? Diseconomies of scale?
  3. How many units of output will you produce and what price will you charge for each unit?
  4. Is the company making a profit or loss at the suggested output level?How much?

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