Question

Walter is an antitrust consultant. He currently works in a large European city with many other antitrust consultants Walter is considering moving to Tampa, Florida, where there are currently several other antitrust consulting firms. If Walter makes this move, he will be a monopolistically competitive firm Walter knows that the demand for his antitrust consulting services in Tampa is: 04 = 2,200 - 5P where " is the number of hours of antitrust consulting services demanded and is the hourly price of antitrust consulting services Walter's total cost of setting up an antitrust consulting firm in Tampa and producing consulting services is TC(Q) = 20,000 + 1600 where is the number of hours of antitrust consulting services that Walter supplies If Walter were to open an antitrust consulting firm in Tampa, his marginal revenue from producing an additional hour of antitrust consulting services would be (Carefully enter your response as an algebraic expression, using the proper notation in the proper formal) If Walter were to open an antitrust consulting firm in Tampa, his marginal cost of producing an additional hour of antitrust consulting services would be hours of consulting services If Walter opens an antitrust consulting firm in Tampa, his profit maximizing number of antitrust consulting hours would be per hour Walter's profit maximizing price for an hour of consulting services would be

Answer 1

Given Q^d=2200-5P

On rearranging, we get

5P=2200-Q^d

P=440-0.2Q^d

Total Revenue=P*Q^d=440Q^d-0.02Q^d2

Marginal Revenue=MR=dTR/dQ^d=440-0.04Q^d or 440-0.04Q

TC(Q)=20000+160Q

Marginal Cost=MC=dC(Q)/dQ=160

Set MR=MC for profit maximization

440-0.4Q=160

Q=700 (Profit maximizing number of consulting hours)

P=440-0.2Q=440-0.2*700=$300 per hour (Profit maximizing price per hour)