The demand curve for haircuts at Terry Bernard's Hair Design is, P = 22 - 0.22Q, where Q is the number of cuts per week and P is the price of a haircut. Terry is considering raising her price above the current price of $9 (which also represents her fixed costs). She will offer as many haircuts at the current price as the market wants, with a maximum of 100 per week. Hint: if AVC is constant, AVC = MC.) a. Graph the Demand curve and the implied Supply curve (both curves must be exact). Label both the equilibrium at $9 and unit elastic point.
If the Supply curve instead represents Terry's marginal cost curve (MC), what price should she charge to maximize profit? What is the profit in dollar terms?