2. The Ali Baba Co. is the only supplier of a particular type of Oriental carpet. The estimated demand for its carpets is Q=112,000 -500P + 5M
The estimated total variable cost function, average variable cost function and marginal cost function of Ali Baba's carpets is:
TVC=200Q-0.012Q2 + 0.000002Q3
AVC=200 -0.012Q + 0.000002Q2 MC=200-0.024Q + 0.000006Q2
Consumers' income per capita is expected to be $20,000 and total fixed cost is $100,000.
a. How many carpets should the firm produce in order to maximize profit?
b. What is the profit maximizing price of carpets? (2.5 points)
c. What is the maximum amount of profit that the firm can earn selling carpets?
d. Answer parts a thru c is consumers' income per capita is expected to be $30,000 instead.