Question # 3 studying purposes

Your firm produces an alloy used for second generation manufacturing. This market is a mature market with a large number of buyers and sellers with no barriers to entry or exit. The demand curve is defined as:

P = 200 - 0.25 Q_D

The supply curve is defined as:

P = 25 + 0.75 Q_S

a) Solve for the total market quantity and equilibrium price for the alloy.

As an analyst for this firm, you have been tasked to solve for the ideal level of production that will ensure that the firm will be producing at a maximum level of profit. Your fixed costs are at $57 and total variable costs are:

TVC = Q + Q²

b) Solve for the profit-maximizing level of output and confirm that the ideal production level that you arrived at above is a maximum. How much market share do you anticipate having?

Your firm decides to expand into an overseas market where you are going to be the sole producer of this alloy. The demand curve for this market is:

P = 500 - 0.15 Q_D

c) What will be your level of output under this scenario assuming that your firm's objective is to maximize profit? How do your results under this scenario differ from the one above? Is this what you expected? Why or why not? Who benefits and who suffers from these differences? How do you measure the costs and benefits for each party?

d) Your overseas subsidiary has been an attractive investment for portfolio managers. Explain why that is the case. What would be the long-term risks that your overseas affiliate could be facing?