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Optimal Parameters in a Monopolistic Environment

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QUESTION 1
Katrina's Candies is operating in the monopolistically competitive market structure and faces the following weekly demand and short-run cost functions:

VC = 20Q+0.006665Q2 with MC=20 + 0.01333Q and FC = $5,000

P = 50-0.01Q and MR = 50-0.02Q

*Where price is in $ and Q is in kilograms. All answers should be rounded to the nearest whole number.

Algebraically, determine what price Katrina's Candies should charge in order for the company to maximize profit in the short run. Determine the quantity that would be produced at this price and the maximum profit possible.

NOTE: The profit is maximized when the company charges a price and produces the quantity at which marginal cost is equal to marginal revenue

QUESTION 2
Katrina's Candies is operating in the monopolistically competitive market structure and faces the following weekly demand and short-run cost functions:

VC = 20Q+0.006665Q2 with MC=20 + 0.01333Q and FC = $5,000

P = 50-0.01Q and MR = 50-0.02Q

*Where price is in $ and Q is in kilograms. All answers should be rounded to the nearest whole number.

Algebraically determine what price Katrina's Candies should charge if the company wants to maximize revenue in the short run. Determine the quantity that would be produced at this price and the maximum revenue possible.

NOTE: Please note that the total revenue is maximized when marginal revenue is equal to zero.
If MR = 0, no additional revenue can be generated by producing more quantity of a good

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Solution Summary

Solution determines the output level for profit and revenue maximization using algebra for two similar questions.

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1. Katrina's Candies is operating in the monopolistically competitive market structure and faces the following weekly demand and short-run cost functions:
VC = 20Q+0.006665Q2 with MC=20 + 0.01333Q and FC = $5,000
P = 50-0.01Q and MR = 50-0.02Q
*Where price is in $ and Q is in kilograms. All answers should be rounded to the nearest whole number.
Algebraically, determine what price Katrina's Candies should charge in ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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