Problem: It is assumed that the liquid soap market is perfectly competitive and the current price of a case of liquid soap is $42.00. The firm has estimated it's marginal cost function to be as follows: MC=0.006Q.
1. Calculation for # cases to maximize profits with example.
2. What happens if the firm unilaterally raises prices in this market?
3. What happens to profit max level of output if the market price quickly increased to $54.00/case? Explain why the output level changes.
4. Can the firm benefit by advertising in this perfectly competitive market?
5. What would happen to the price of liquid soap if the firm monopolizes the market, does it rise or fall? What effect does that have on the firm's profits for the liquid soap division?