The demand price for a monopolistic firm's product is a function of quantity q and quality s: P (s,q) = s(a-bq), while the firm's production cost is a function of quality s only: C(s,q) = 0.5s^2. 1. Find all three stationaries (i.e., critical) point (s*, q*) of the monopolistís proÖt maximization problem. 2. Use the determinantal test to check whether the stationary points is the firm local maximum, global maximum, local minimum, global minimum, or neither.
The demand price for a monopolistic firm's product is a function of quantity q and quality s: P (s,q) = s(a-bq), while the firm's production cost is a function of quality s only: C(s,q) = 0.5s^2. 1. Find all three stationaries (i.e., critical) point (s*, q*) of the monopolistís proÖt maximization problem. 2. Use the determinantal test to check whether the stationary points is the firm local maximum, global maximum, local minimum, global minimum, or neither.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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The demand price for a monopolistic firm's product is a function of quantity q and quality s: P (s,q) = s(a-bq), while the firm's production cost is a function of quality s only:
C(s,q) = 0.5s^2.
1. Find all three stationaries (i.e., critical) point (s*, q*) of the monopolistís proÖt maximization
problem.
2. Use the determinantal test to check whether the stationary points is the firm local maximum, global maximum, local minimum, global minimum, or neither.
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