The Jenkins Tool Company estimated the following demand equation for its product:
Qd = 12000 - 4000P
Where p = price / unit, Qd = quantity demanded/year;
The firm's total cost is 4000 when nothing is being produced. These costs increase by 50 cents for each unit produced.;
a. Write an equation for the total cost function.
b. Specify the marginal cost function
c. write the equation in terms of Q
d. specify the marginal revenue function
e. write an equation for total profits in terms of Q. At what level of output are total profits maximized? What price will be charged? What will total profit be?
f. Check answers for part e. by equating marginal cost and marginal revenue and solving for Q.
g. What model of market pricing behavior has been assumed in this problem?