The demand for a monopoly seafood restaurant’s lunch is estimated to be: Q = 200 – P Assume TC = 10Q What price and quantity maximize profit assuming the firm charges the same price to all customers? Show all work. Draw the graph to illustrate.
1. The
Q = 200 – P
Assume TC = 10Q
- What
price and quantity maximize profit assuming the firm charges the same price to all customers? Show all work. Draw the graph to illustrate.
2. Now suppose a second seafood restaurant opens across the street. There are now two firms. The products are differentiated so that
Demand for firm 1’s product: Q1 = 100 – p1 +(1/2)p2
Demand for firm 2’s product: Q2 = 100 – p2 + (1/2)p1
And TC1 = 10Q1; TC2 = 10Q2
Assuming both firms behave as Bertrand duopolists, solve for p1 and p2. Show all work. Graph the reaction functions.
3) Suppose that in response to the presence of a superior competitor, firms polished its image and improved. As a result:
Demand for firm 1’s product: Q1 = 160 – p1 +(1/2)p2
Demand for firm 2’s product: Q2 = 160 – p2 + (1/2)p1
And TC1 = 20Q1; TC2 = 20Q2
Assuming both firms behave as Bertrand duopolists, solve for p1 and p2. Show all work. Graph the reaction functions.
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