A monopoly firm faces two markets where the inverse demand curves are &nbs

A monopoly firm faces two markets where the inverse demand curves are

Market A: PA =140 − 2.75QA,

Market B: PB = 120 − QB.

The firm operates a single plant where total cost is C = 20Q+0.25Q^2,

and marginal cost is m = 20 + 0.5Q.

Suppose the firm sets a single price for both markets. Using the information above, the profit maximizing price is $86.18 and the profit maximizing quantity is 53.37 units. Given this information, you determine that the firm will earn a profit of

(Round your response to two decimal places.)

Solutions

Expert Solution

Answer:

profit maximizing quantity Q = 53.37 units

Total cost for the firm = 20*Q + 0.25*Q^2

Total cost for the firm = 20*53.37 + 0.25*(53.37)^2

Total cost for the firm = $1779.49

Total Revenue = Price * Q

Total Revenue = 86.18*53.37 = $4599.43

Profit = Revenue – Cost = $4599.43 - $1779.49

Profit = $2819.94

Rahul Sunny answered 1 year ago

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