The Poster Bed Company believes that its industry can best be classified as monopolistically competitive. An analysis of the demand for its canopy bed resulted in the following estimated demand function for the bed:
P = 1760-12Q
The cost analysis department estimates the total cost function for the poster bed as:
TC = Q³-15Q²=5Q+24,000
a.Calculate the level of output that should be produced to maximize short-run profits.
b.What price should be charged?
c.Compute total profits at this price-output level.
d.Compute the point price elasticity of demand at the profit-maximizing level of output.
e.What level of fixed costs is the firm experiencing on its bed production?
f.What is the impact of a $5,000 increase in the level of fixed costs on the price charged, output produced, and profit generated?