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Suppose there is a monopolistic car company in a country with 10,000 car owners. All cars produced by the car company are sold to these
Suppose there is a monopolistic car company in a country with 10,000 car owners. All cars produced by the car company are sold to these car owners at the current prices. The car owners drive 8,000 miles per year on average. The car company produces two types of car (10,000 cars produced in total): car A that achieves 25 MPG and sold at $20,000 car B that achieves 50 MPG and sold at $50,000 The car company's profit function is PAQA + PBQB - 2QA 2 - 8QB 2 , where PA and PB are prices and QA and QB are quantities sold. This function implies that car B is more costly to produce, when compared to car A. What is the profit-maximizing production level of car A and car B? What is the annual aggregate consumption of gasoline for cars
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