Marginal cost-profits and graph equilibrium

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Reference no: EM1312207

Given the following production information of a monopolistic firm:

Output level = 100 units

Average variable cost = \$10/unit

Total fixed cost = \$400

The firm is producing at the minimum point of its average cost curve.

a) At this output level, calculate the average cost and the marginal cost.

b) Draw a diagram showing the current situation of the firm.

c) In addition to the above information, suppose the price of the output is \$13/unit, if the firm wants to maximize its profit, what should it do? Explain in detail with the aid of a diagram.

d) Suppose the price of the output is \$16/unit instead, if the firm wants to maximize its profit, what should it do? Explain in detail with the aid of a diagram.

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