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How can I begin this economics problem?

The demand function is 2Q=200-P

This is the graph http://img156.imageshack.us/img156/8899/untitledrw6.jpg

The info is: The cost of dina’s coiffeur is that it has 2 perm machines each has a cost of $100 and a unit cost of a perm is $20

I dont know how to begin with the info given.

I need to find the maximizing profit in a perfectly competitve industry and monopoly.

The formula for profit is
Profit = (p x q) – (atc x q ) or (p x q) – (w x l) – (r x k) – FC

But i dont know what numbers to plug in.

Also, how do i find the marginal cost, so i can draw the graph.

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This entry was posted on Monday, March 15th, 2010 at 12:31 am and is filed under plug in profits. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

One Response to “How can I begin this economics problem?”

  1. Homer J. Simpson Says:
    March 15th, 2010 at 12:40 am

    Monopoly pricing:

    1. Turn the demand eqn into revenue.
    p=200 – 2Q
    R=P*Q=200Q-2Q^2

    2. find marginal revenue (differentiate wrt q)
    MR=200-4Q

    3. set equal to marginal cost
    200-4Q=20

    4. solve for Q
    Q=(200-20)/4=45

    5. solve for price
    P=200-2*45=110

    6. find profit
    prof=110*45-20*45-200

    competitive pricing:

    In this case, the MC = LRAC, so the solution is the same.