1) The Fox Company has market power (faces a downward-sloping demand curve). The industry's total cost is

C= 30Q +1.5Q^2 and its inverse demand is P = 300 - 3Q.

What is the firm's profit-maximizing output and price?

 

If the firm's inverse demand changes to P = 240 - 2Q and its total costs remain unchanged, what is the firm's profit-maximizing level of output and price? State how this compares to the answer for the first bullet point.

 

Sketch a diagram to show the outcomes for the above bullet points. Holding marginal cost equal, how does the shape of the demand curve impact the ability of the firm to charge a higher price?

Answer rating: 100% (QA)

To find the firms profitmaximizing output and price we need to determine the quantity and price at which the firm maximizes its profit We can do this ... View the full answer