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A monopolist firm with the following cubic cost function
TC = 3Q3- 40Q2+ 250Q + 900 faces the following market demand function for its product P = 2000 - 10Q
The management of the firm decides to follow a three-stage market strategy
1- find the level of output that minimizes its average total cost
2- find the level of output that maximizes its total revenue
3- choose the average of the two levels for actual production
(a) What is the level of output in this strategy compared to the profit maximizing output?
(b) What is the price level in this case compared to the profit maximizing case?
What would be the amount of the firm's total revenue at the quantity and price identified in the prior two questions. What would be the amount of the firm's profit (positive number) or loss (negative number) at the quantity and price identified
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