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Finding the optimal price and output levels

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2. Your company sells its product online and in stores. Your marginal cost $30 is the same in both markets. The demand and marginal revenue curves in the two markets are different however.
Qonline = 1,000-2 Ponline
MRonline = 500-Qonline

Qstores = 200-Pstores
MRstores = 200-2 Qstores

2.1 What is the profit maximizing price level in each market?
Online
Stores

2.2 At those prices, what output is sold in each market?
Online
Stores

2.3 Which market has a more elastic demand?

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Solution Preview

2.1 What is the profit maximizing price level in each market?

Online :
Profit will be maximized when MRonline=MC.
500-Qonline=30
Qonline=470

Qonline =1000-2 Ponline
Put ...

Solution Summary

Solution describes the steps to calculate optimal price and output combination in each of the given market segments.

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Finding optimum price and output levels..

Perfect Competition
Given the following equations:

Qd=-1000P+Income+11000
TC=(1/70)q^2-(25/35)q+100
MC=(1/35)q-(25/35)
Number of firms =85

Assume Income =11000.
i.What is the market supply equation?
ii.What is the market equilibrium price ?
iii.What is the market equilibrium quantity?
iv.What is the profit maximizing output (PMO) level?
v.What is the average profit and total profit at this PMO level?

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