Question

Assume that two identical firms in a purely oligopolistic industry selling a homogenous product agree to share the maket equally. The total market demand function for the commodity is Qd = 240 - 10P. The cost schedules of the firms are given in the following table:

q1 40 50 60 80 q2 50 70 100

SMC1 (Rs.) 8 10 12 16 SMC1 (Rs.) 4 6 9

SAC1 (Rs.) 13 12.3 12 13 SAC1 (Rs.) 7 6 7


Find mr1 when q1=40?

Answer 1

We plot the dependency data. The thin line shows the dependencies for q1, and the thick line for q2.

$$40+50=240-10p$$

$$p=15$$

$$TR=pQ=15\times40=600$$

$$MR=MC$$

$$MC=S_{MC}Q$$

$$MR_1=8\times40=320$$