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.) 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 $50,000 per month? Explain.