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# What is the inverse demand function and profit maximizing price and level of production for a monopolistically competitive firm?

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You are a manager of a monopolistically competitive firm, and your demand and cost functions are given by Q=20-2P and C(Q) = 104 - 14Q + Q^2

a) find the inverse demand function for your firms product
b) determine the profit maximizing price and level of production
d) what long run adjustments should you expect.

https://brainmass.com/economics/price-levels/determining-price-level-production-profits-229960

#### Solution Preview

a) Inverse Demand Function would be
P= (20-Q)/2
=> P = 10 - 0.5Q

b) Profit maximization happens when Marginal Revenue equals Marginal Cost
First we determine Marginal Revenue
Total Revenue = PxQ = 10Q - 0.5Q^2
Therefore Marginal Revenue (MR) = 10 - Q ...

#### Solution Summary

This solution provides step by step calculations for determining price, level of production, and profits. It briefly discusses expected long run adjustments.

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