.. Consider the following demand and cost information for a monopoly. Find profit-maximizing price and quantity. Finally, find the…

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.. Consider the following demand and cost information for a monopoly. Find profit-maximizing

price and quantity. Finally, find the maximal profit. (You’ll need to find the firm’s TR, MR, and

MC for each level of quantity.)

Quantity

0

1

2

3

4

Price

$30

$25

$20

$15

$10

Total Cost

$3

$7

$12

$18

$25 Your chief economist estimates the log-log demand curve Q=23-0.7*In(P) +0.5*In(A),

where P is the price of your product and A is the dollar amount spent on advertising. You recall

your economics class from Winthrop and how coefficients of a log-log regression represent

elasticities: 0.7 is the price elasticity of demand (PED), and 0.5 is the advertising elasticity of

demand (AED). If your firm’s total revenue is $100,000, using all this information, find how

much money you should set aside for advertising purposes for your product. What percentage of

your total revenues is that amount?

s/Q

212

136

120

110

104

96

60

700 810 884

MR

MC

ATC

976 1,000

Q/t

Observe the graphical representation of the monopoly firm above. Please find this firm’s TR.

TC and profit at the firm’s optimal output level.

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