Create a spreadsheet illustrating the determination of a monopoly firms' profit maximization decision.

1. Below are the equations necessary for the monopolistic firm's profit maximization decision.

 TC = F + cQ Total Cost Equation ATC = F/Q + c Average Total Cost Equation AVC = c Average Variable Cost Equation MC = c Marginal Cost Equation P = a - bQ Market Demand MR = a - 2bQ Marginal Revenue

Begin by choosing your own values for the following parameters:

a = demand intercept, a > 0
b = demand slope,
F = Fixed Cost
c = cost parameter, c > 1

2. Create a table showing Q, ATC, AVC, MC, MR, and P. Use this table to create your X-Y chart. In creating your table, please make sure that you "anchor" the parameter values to ones chosen in Step 1. (By doing this, your graph and calculations will adjust automatically whenever you change any of the parameter values).

• In your chart you will plot P, MR, ATC, AVC, and MC (all on the vertical axis) versus Q (on the horizontal axis).

3. Create an area on your spreadsheet that allows the calculation of the following values to be calculated based on the equations from Step 1 above. Your equations for these values should refer to the "anchored" parameter values chosen in Step 1 such that, if a user were to change any of the parameter values, then the spreadsheet will automatically recalculate the optimal values:

• profit-maximizing quantity
• profit-maximizing price
• Price elasticity of demand at the equilibrium
• Consumer surplus
• Producer surplus