Question

Consider a monopolistic competitor who has the following demand function P=140-4Q. In addition suppose that his total cost function is given by TC=10+5Q2.

Required:

i) Find his equilibrium price (P) and quantity (Q). ​​​​

ii) What is his maximum profit? ​​​​​

b) Explain the features of monopolistic completion.​​​​]

REVISION QUESTION

a) A perfectly competitive firm is faced with the following total cost schedule

Q​= 0​1​2​3​4​5​6​7​8​9​10​


TC​= 9​20​30​39​47​54​60​67​77​90​109


Required:


(i) If the market price is $13, what output will the firm choose to produce to maximize profit? What is the maximum profit?

Answer 1

a) MR$=$ MC;

MC$=10Q;$

$MR=((140-4Q)×Q )'=(140Q-4Q^2)'=140-8Q;$

$10Q=140-8Q; 18Q=140;$

$Q=$ $7.8;$

$P=140-8×7.8; P=140-31.2;$

$P=$ $$108.8;$

Profit$=TR-TC;$

$TR=7.8×108.8=$ $ $848.64;$

$TC=10+5×7.8^2=$ $ $314.2;$

$Profit=848.64-314.2=$ $ $534.44$;