Question

There are many companies that make turbans, but ManMan Headgear is famous for their distinctive blue turbans.

The demand for ManMan turbans is given by P = 100 – 2Q

The cost of producing turbans is given by C = 4Q

1.

What type of market structure does this sound like? You don't need to explain.

2.

What Quantity will ManMan produce if they can't use any advanced pricing strategies?

3.

What Price will ManMan charge if they can't use any advanced pricing strategies?

4.

What will ManMan's profit be?

Answer 1

The market with few numbers of sellers and large number of buyers is known as Oligopoly market. In the oligopoly market if the all goods which are sold in market are homogeneous in nature is known Pure Oligopoly. The differentiated products which are sold in the oligopoly market is known as Differentiated Oligopoly. In the oligopoly market all firms can depend each other to make their own decisions. Sometimes they must follow the pricing strategies to earn the profit.

There are many companies who make turbans, in which ManMan Headgear is the best for their distinctive blue turbans.

The demand for ManMan turbans is given as

P=100-2Q where P is the price and Q is quantity produced

The cost of the production of turbans is C=4C. Where C is cost of production of Q

1) This market structure follows the pure oligopoly market structure. Because all the firms in the market are selling homogeneous product say turbans. So it is the pure oligopoly market.

• The equilibrium condition for profit maximisation for imperfective competitive market is given as Marginal Revenue = Marginal Cost.

2)The ManMan Headgear company demand function is given as P= 100-2Q

The Revenue of The ManMan Headgear company is given as

R= 100Q - 2Q²

The Cost of The ManMan Headgear company is given as

C=4Q.

The profit function for the ManMan Headgear company is given as

Profit (N) = Revenue- Cost.

N=100Q-2Q² -4Q

If the firm doesn't use any price strategies, the profit maximising condition is dN/dQ=0

First Order condition for profit maximisation, taking differentiation the profit function with respect to Q

dN/dQ= 100- 4Q-4

dN/dQ=0

96-4Q=0

4Q= 96

Q= 24

The ManMan company will produce the quantity Q=24 unit.

3) The ManMan Headgear Company will produce 24 unit of quantity.

At 24 unit of output the ManMan Headgear Company will charge price rate P , which is calculated by following way.

P= 100 -2Q

P= 100 -2(24) put the value of Q

P= 52.

The Man Man company will charge 52 for quantity 24 unit.

4) The profit function for the ManMan Headgear Company be given as

Profit (N) = Revenue - Cost

Where Revenue function be

R= 100Q-2Q²

Put the value of Q=24

R= 100(24)-2(24)²

R= 2400-1152

R= 1248

The cost function for ManMan Headgear Company is given as

C= 4Q

Put the value of Q= 24

C=96

So the profit function of the ManMan Headgear Company is given as

Profit= R-C

Profit = 1248-96

Profit = 1152.

ManMan's profit will be 1152.

The ManMan Headgear Company is a pure Oligopoly market. It works with out any price strategies.