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    profit maximization

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    Suppose a firm in an oligopolistic industry faces the following demand curve:

    P = 4,900 - 2 Q for Q < 10,000
    P = 20,000 - 0.6 Q for Q > 10,000

    Suppose further its Cost function is as follows:

    TC = 1,000 + 100Q +.5 Q2

    a. What price do you suppose they will charge in the short run?
    b. What do you suppose will happen in the long-run?

    © BrainMass Inc. brainmass.com October 9, 2019, 11:43 pm ad1c9bdddf

    Solution Preview

    For profit maximization, we set MC=MR

    MR = dTR/dQ
    So we have TR=4900Q-2Q^2 for Q<10000
    and TR = 20000Q-0.6Q^2 for Q>10000

    MR= 4900-4Q for Q<10000 and MR=20000-1.2Q for Q>10000

    Now let us assume that Q<10,000 then equating MC=MR, we ...

    Solution Summary

    This posting determines profit maximization.