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Suppose the demand and cost function for a monopolistically competitive firm are given by P=36-4Q and C(Q)=124-16Q+Q2, respectively.

A. Determine the profit-maximizing price and level of output.

B. Calculate the firm's profits.

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Divya Singh
Divya SinghLv10
28 Sep 2019

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Related questions

The inverse demand for a firm's product is P = 400 - Q - 4Q2. The firm's cost of production is

C(Q) = 16Q - Q2 + 4Q3. The firm's problem is to find the profit-maximizing point on its demand curve.

a. Calculate the firm's marginal revenue function.

b. Calculate the firm's optimal price and output.

c. Calculate the profit using the equilibrium Q.

A firm uses a single plant with costs C = 160 + 16Q + .1Q2 and faces the price equation P = 96 - .4Q.
a. Find the firm's profit-maximizing price and quantity. What is its profit?

b. The firm's production manager claims that the firm's average cost of production is minimized at an output of 40 units. Furthermore, she claims that 40 units is the firm's profit-maximizing level of output. Explain whether these claims are correct.

c. Could the firm increase its profit by using a second plant (with costs identical to the first) to produce the output in part (a)? Explain.

Problem II. Suppose the inverse demand function for a monopolistically competitive firm’s product is given by P = 100 - 2Q and the cost function is given by TC=52 + 4Q.

1. Determine the profit-maximizing price and quantity.

2. Determine the maximum profits.

3. Can we say that this firm is operating in the long-run or short-run equilibrium at the equilibrium price and quantity?

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