A software producer has fixed costs of $120,000 per month and her Total Variable Costs (TVC) as a function of output Q are given below. Complete the table (TC, MC, TR, and MR), then answer Parts A and B.
Q TVC Price
1,000 $115,000 $125
2,000 120,000 74
3,000 130,000 55
4,000 150,000 44
5,000 180,000 30
(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 $160,000 per month? Explain.