What is the inverse demand function?

Reference no: EM13173436

1. Ajax, Inc. is a monopolist. The estimated demand function for its product is

Qd = 120 %u2013 0.8P + 12Y + 4A

Where Qd denotes quantity demanded, P denotes price, Y denotes personal income (in thousands of dollars), and A denotes advertising expenditures in hundreds of dollars.

Ajax's marginal cost function is given as

MC = 21 + 4Q

Assume Y equals 3 and A equals 3 and fixed costs equal $1000

a. What is the inverse demand function?

b. What is the profit maximizing price and quantity of output for Ajax, assuming it is an unregulated monopoly? What are its profits?

c. If fixed costs increase to $1200, what will happen to equilibrium price and quantity?

Reference no: EM13173436

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