A compagny WasserProduct, a water production and distribution company is in a monopoly situation. it's total cost function is given by: CT (q) = q² + 10q where q represents the quantities produced in millions of m ^ 3 of water. She is faced with the following request p = 50-4q with p the price in cents. 1) Calculate the price, quantity and monopoly profit of WasserProduct 2) Represent graphically the demand curves of average cost, marginal cost and marginal revenue of WasserProduct 3) WasserProduct learns from the news that a potential entrant wants to enter the market by selling 5 units at a unit cost of 20.
A compagny WasserProduct, a water production and distribution company is in a
it's total cost function is given by:
CT (q) = q² + 10q
where q represents the quantities produced in millions of m ^ 3 of water. She is faced with the following request
p = 50-4q
with p the price in cents.
1) Calculate the price, quantity and monopoly profit of WasserProduct
2) Represent graphically the demand
3) WasserProduct learns from the news that a potential entrant wants to enter the market by selling 5 units at a unit cost of 20.
Determine the price level below which WasserProduct can set a limit price (it's possible that i need to use the inequality PL < Ce + |a|Qe)
Then check whether the monopoly price calculated in question 1 can be considered a limited price
4) Would WasserProduct remain profitable if the entrant were to enter the market anyway (for this you have to calculate the market price that will rise as a result of the entry of the competitor)?
5) The entrant finally decides to attack the demand not served by Wasserproduct assuming that Wasserproduct will maintain its monopoly price calculated in question 1.
Calculate the entrant's residual demand, it's marginal revenue and the price that maximizes its profit.
Is WasserProduct's monopoly price still a limit price here ?
6) Propose another price limit level for WasserProduct that would dissuade entry
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