Tayda Inc. is operating in a monopolistically competitive market where industry demand is given by P=120,000-60Q....

Tayda Inc. is operating in a monopolistically competitive market where industry demand is given by P=120,000-60Q. Tayda’s demand is 1/20th of the industry demand at each price and it has a total cost given by TC(Q) = 2,500,000+4Q2 . All costs are due today and Tayda will get all revenue in one year (demand will stay as it is). Market rate is 10%.

a) What is the Internal Rate of Return of Tayda’s business?

b) If Tayda can perfectly price discriminate at the optimal Q obtained in part (a) what would be the Internal Rate of Return of Tayda’s business?

Please include complete explanation of what is Internal Rate of Return and step-by-step solution for the problem.

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Expert Solution

Rahul Sunny answered 1 year ago

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