Rosebud Private Limited produces cooking oil and has many competitors producing close substitute products. The firm has
Question:
Rosebud Private Limited produces cooking oil and has many competitors producing close substitute products. The firm has the following revenue and cost functions.
TR = 15Q – 0.3Q2
TC = 8Q + 0.02Q2
Where Q is output and price is in $.
a. Identify the market structure the firm is operating in. Explain your choice.
b. Determine the output that maximizes total revenue.
c. Using the marginal approach, determine the output and price that maximizes profit. (Hint: TR=P.Q)
d. Determine the profit/loss of the firm.
e. Based on approach in (c), illustrates using a complete label diagram for a situation that you obtain in (d).
f. Is the firm operating in the short run or long run? Give your reason.
Managerial Economics Theory Applications and Cases
ISBN: 978-0393912777
8th edition
Authors: Bruce Allen, Keith Weigelt, Neil A. Doherty, Edwin Mansfield