A software producer has fixed costs of $18,000 per month and her Total Variable Costs (TVC) as a function of output Q are given below:
Q TVC Price
1,000 $15,000 $25
2,000 20,000 24
3,000 30,000 23
4,000 50,000 22
5,000 80,000 20
(a.) If software can only be produced in the quantities above, what should be the production level if the producer operates in a monopolistic competitive market where the price of software at each possible quantity is also listed above? Why? (Show all work).
(b.) What should be the production level if fixed costs rose to $48,000 per month? Explain.