A software producer has fixed costs of $30,000 per month and her Total Variable Costs (TVC) as a function of output Q are given below:
Q TVC Price 3,000 $ 5,000 $5 13,000 25,000 4 23,000 50,000 3 33,000 80,000 2 43,000 120,000 1 (a.) (15 points) 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?
(b.) What should be the production level if fixed costs rose to $50,000 per month? Explain.