In a pure monopoly the company faces an inverse demand (price) for their product.
p = 20-0.04q1
marginal revenue is r= 20- 0.08q1
and marginal cost is mc1= 0.1+ 0.5q1
total costs is TC1= 5 + 0.1q + 0.25q1(squared)
what is profit maximising level for
c) monopoly profit
If the company wants to produce some of the same product offshore with cheaper labour costs how much production should be undertaken in each factory to maximise total firm profit. Assume transport costs are the same.
and for another factory is m2= 0.1 + 0.3q2
Total costs for another factory are TC1=2 + 0.1q2 + 0.15q2(squared)
P = 20-0.04q1
Marginal revenue is MR1= 20- 0.08q1
and Marginal cost is MC1= 0.1+ 0.5q1
Total costs is TC1= 5 + 0.1q + 0.25q1^2
A monopolist sets its output such that MR=MC to maximize its profit.
q1=19.9/0.58 =34.31 units
If the company wants to produce some of the same product ...
Solution describes the steps to determine profit maximizing level of price, quantity and profit for a monopolist. It also calculates the profit maximizing level of price, quantity and profit if monopolist produces in two factories.