Three firms have identical revenue and profit functions. Firm 1 is a private sector firm operated...

Three firms have identical revenue and profit functions. Firm 1 is a private sector firm operated by an owner-manager who wishes to maximize profit. Firm 2 is managed by an revenue-maximizing manager whose pay is proportional to the firm's revenue. Firm 3 is a government-owned firm that has been instructed to maximize the amount of employment, L, subject to the constraint that revenue must not be negative.

Each of the three firms has a revenue function

R(q)equals=120120qminus−22q squaredq2

and a cost function of

C(q)equals=2020plus+4040q.

Determine how much output each firm chooses.

Firm 1 will produce such that

qequals=nothing

units

Expert Solution

Rahul Sunny answered 1 year ago

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