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Q. "An auto-service establishment has estimated its monthly cost function as follows:
TC = 6000 + 10 Q where Q is the number of cars it services each months also TC represents its total cost. Firm targeting 35000 net monthly profit servicing 2000 cars.
a. Illustrate what price should the firm charge to realize the targeted profit?
b. Illustrate what would be its (cost-based) markup ratio?
c. Now Assume the demand curve the firm faces is:Q = 3000 - 50 P. Is the firm going to achieve its profit goal? Elucidate.
d. If your to answer to (b) is "no", Illustrate what would be the optimal markup ratio for this firm?
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