Where q is output p is price m is income and pr is the


The market demand for a monopoly firm is estimated to be:

Qd = 80,000 -400P + 3M + 2000PR

where Q is output, P is price, M is income, and PR is the price of a related good. The manager has forecasted the values of M and PR will be $60,000 and $15, respectively, in 2008.

The average variable cost function is estimated to be
AVC = 725 - 0.01    Q + 0.000001    Q 2
Total fixed cost in 2008 is expected to be $50,000.

The manager should

shut down; P = $362.50 < TVC = $820

shut down; P = $712.50 < AVC = $725

operate; P = $725 > AVC = $700

operate; P = $712.50 > AVC = $700

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Business Economics: Where q is output p is price m is income and pr is the
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