Question

ilman can incur before they are required to Chillman Motors, Inc., believes it faces P-150-0.5Q when 0<=Q< 50 and 200-1.50 when Q>50. What is the maximum marginal cost increase their price when they face a cost function equal: CIQ-500-750? Select one O a 100 O b. 125 O c50 O d.75

Answer 1

Question 1)

Demand :  

P = 150 - 0.5Q 0<= Q <= 50

P = 200 - 1.5Q Q > 50

Total Revenue = PQ :

150Q - 0.5Q2 0<= Q <= 50

200Q -1.5Q2   Q > 50

Marginal Revenue ( Differentiating Total Revenue with respect to Q):

150 - Q 0<= Q <= 50

200 - 3Q Q > 50

Put Q = 50

Marginal Revenue :

1) 150 - 50 = 100

2 ) 200 - 3(50) = 50

So the firm produces output where marginal revenue equals marginal cost . It can produce Q = 50 till marginal cost of 100 which is maximum.

Questionn 2 )

This is a kinked demand curve. This is linked with Sweezy Oligopoly compeitition

Question 3)

27 I WKODAY 058 107 FRIDAY 9 Duros.307 FEBRUARY 2009 Followa's opeolit maximising condition MR =ME MR = 0 Total Revenue = P Q2 = (500-20) 2 = 1500-2 (0, +22)] 22 = 50 Q2 -29,2, -22, Marginal Revenge = d Total Reveve Marginal Revenue = 500 - 20 - 49 MR2 = Me NT NOTES MR, lo 2009 O = 7 Follower's I reaction d curve IH 19 20 21 25 26 27 28 soo-20, - y

FEBRUARY | 2009 DAY 059-306 WK 09 SATURDAY DAY 059306 wkog 28. MR, IMC Total Revenus = pa, (soo-2 (9,722)] Q, = p sood, -2Q? - 20,0, MAR

WKODAY 061301 MONDAY MARCH 2009 Total Rcranve = rm - 202- 2Q (500-24,17 4 + 0,2 1 - 5000 - 2Q 2 - 250 Q, n = 2500 -0,2 Marginal Revive - dotal Revenue option ) MPORTANT NOTES MARCH 2009 MTWTT5 9 10 11 12 13 16 17 18 19 20 23 24 25 26 27 30 31 14 21 28

Question 4)

c) None of the options are correct

Equating marginal revenue to marginal cost is the profit maximising condition same for all compeitition types