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Unformatted text preview: c) If MC=30, profit maximizing quantity Q* must satisfy MR = MC = 30. Since MR = 702Q, we must have 702Q* = 30 Hence, Q* = 20. d) To sell 20 units, the firm needs to set the price to be P* = 70 Q* = 70 20 = $50. Profit at this quantity = (PATC)*Q = (5060)*20 = $200. This firm is taking an economic loss of $20. 2. a) & (b) the marginal revenue are: $60, $48, $36, $24, $12, 0, $12, $24. The optimal quantity is 5. To sell 5 units, the bookstore should charge a price of $36. c) The economic profit = ($36$12)*5 = $120. d) The socially efficient number should be at least 8 since the 8 th person still has a reservation price higher than the marginal cost....
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 Winter '08
 TANG

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