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Question 3 Suppose that a firm in an oligopolistic industry faces the following kinked demand for its product: Q1 = 100 - P Q2 =
Question 3 Suppose that a firm in an oligopolistic industry faces the following kinked demand for its product: Q1 = 100 - P Q2 = 160 - 2P where Q represents units of output and P the price of the product. Suppose further that the firm's total cost equation is given by the equation: TC = 100+ 30Q (a) What are the profit-maximizing price and output? (b) Between what values may marginal cost vary without causing a change in the equilibrium price and quantity? (c) Calculate the maximum profit for this firm. (d) Suppose that the firm's total cost of production was to increase to: TC = 140 + 50Q Will this alter the firm's profit-maximizing price and output level? Explain carefully. Calculate the maximum profit for this firm. (2+3+2 + 3 = 10 marks)Question 3 Suppose that a firm in an oligopolistic industry faces the following kinked demand for its product: Q1 = 100 - P Q2 = 160 - 2P where Q represents units of output and P the price of the product. Suppose further that the firm's total cost equation is given by the equation: TC = 100+ 30Q (a) What are the profit-maximizing price and output? (b) Between what values may marginal cost vary without causing a change in the equilibrium price and quantity? (c) Calculate the maximum profit for this firm. (d) Suppose that the firm's total cost of production was to increase to: TC = 140 + 50Q Will this alter the firm's profit-maximizing price and output level? Explain carefully. Calculate the maximum profit for this firm. (2+3+2 + 3 = 10 marks)
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