A steel mill in Canada has inverse demand function p = 100 – q (so its...

A steel mill in Canada has inverse demand function p = 100 – q (so its revenue function is given by R = 100q – q²) and cost function is C = 80 + 4q.

a) What is the firm’s output under each of the following three regimes?

i) Profit maximization.

ii) Revenue maximization.

iii) Output maximization subject to nonnegative revenue.

b) If MC = 0, which of the above three regimes (profit-maximizing, revenue-maximizing or output maximizing) is likely to yield higher total surplus (or be closer to competitive equilibrium)? Explain briefly without any calculation.

Expert Solution

Rahul Sunny answered 1 year ago

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