Question

Price($)          Quantity(‘000 ton)

350                 5

300                 10

250                 20

200                 25

150                 30

100                 40

50                   55

 

A town has 80 households and two production firms on fast food: Alpha & Beta,

If Alpha reneges on the agreement and produces Q = 30 tones and Beta will produce the remaining tones with market quantity 55 ton and cost $25 per ton.  Calculate Alpha’s and Beta’s profits.(10 marks)

Answer 1

The market price corresponding with the market quantity is $50. So, Beta's profit is (55-30)×(50-25)=$625

Alfa's profit is 30×(50-25)=$750