Bus 640 Market Structures And Pricing

A small business which produces plastic vacuum-suction covers for round household dishes has a monopoly that is protected by a utility patent. The market demand curve for this product is estimated to be Q 6009 25P where Q is the number of plate covers per year and P is in dollars. Cost estimation processes have determined that the firms cost function is represented by TC 120 2500Q -0.25Q2. What is the profit-maximizing price and output level Solve this algebraically for equilibrium P and Q and also plot the MC, D and MR curves and illustrate the equilibrium point. Since the business has a patent over the item, it can act as a monopolist while determining its profit maximizing level of output and price. The demand curve is Q6009 25P, which can be rewritten as, P (6009-Q)/25 240.36 - 0.04Q The total revenue curve is given by, TRPQ Q(240.36 - 0.04Q) 240.36Q - 0.04Q2. The marginal revenue function is, MRdTR/dQ 240.36 - 0.08Q. The total cost function is given by, TC1202500Q-0.25Q2. The marginal cost is, MC dTC/dQ 2500 -0.5Q. Thus the optimal plan for the business would be to produce zero units of output. As can be seen from the diagram,