Question

cost function is C(Q) = 1400 + 0.5Q2

for RussCo to produce its new Phone. Using that cost function for the Phone, determine the profit-maximizing output, price and profit (or loss) for the RussCo Phone, and discuss its long-run implications, under three alternative scenarios:
  
a. RussCo Phone is a perfect substitute with a similar product offered by Apple, Samsung and several other Phones that have similar cost functions and that currently sell for $400 each.
b. RussCo Phone has no substitutes and so is a monopolist, and the demand for the RussCo Phone is expected to forever be Q = 34.66 – (1/6)P – use cost function (TC(Q) = 1400 + 0.5Q2).
c. RussCo Phone currently has no substitutes, and currently, the demand for the RussCo Phone is Q = 88 – (1/5)P, but RussCo anticipates other firms can develop close substitutes in the future. – use cost function (TC(Q) = 1400 + 0.5Q2).

Answer 1