Question #16047

If A firm with market power has estimated the following demand function for its product:

Q = 12,000 – 4,000 P where P = price per unit and Q = quantity demanded per year.

The firm’s total costs are $4,000 when nothing is being produced. These costs increase by 50 cents for each unit produced. What is the equation for the firms total cost function, marginal cost function, total revenue and marginal revenue (in terms of Q)

Q = 12,000 – 4,000 P where P = price per unit and Q = quantity demanded per year.

The firm’s total costs are $4,000 when nothing is being produced. These costs increase by 50 cents for each unit produced. What is the equation for the firms total cost function, marginal cost function, total revenue and marginal revenue (in terms of Q)

Expert's answer

Total revenue can be expressed by multiplying Quantity and Price

Total Revenue = Q*P= 12,000P-4,000P2

Marginal revenue function is derivative of total cost function:

Marginal revenue = 12,000-8,000P

Total cost = 4,000+0.5Q

Marginal cost is derivative of total cost

Marginal cost = 0.5

Total Revenue = Q*P= 12,000P-4,000P2

Marginal revenue function is derivative of total cost function:

Marginal revenue = 12,000-8,000P

Total cost = 4,000+0.5Q

Marginal cost is derivative of total cost

Marginal cost = 0.5

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