This preview shows page 1. Sign up to view the full content.
Unformatted text preview: quantity. 4. Your answer for (2) will have the form gQ+hQ 2 , where g and h are numbers. This means that marginal revenue =g+2hQ. Write down the marginal revenue function. 5. Total costs for Fergie are 0.2Q 2 +900. Therefore marginal costs are 0.4Q. Equate marginal revenue and marginal costs to find profit maximizing Q. 6. Use this, and your calculations in (3) to find the profit maximizing price. 7. Now use (1) to find the market area. . 8. Repeat everything, but with transport costs = $4/mile. What are the effects on price, quantity and market area? Interpret. 9. Reassuming the $2 transport costs, if entry occurs until profits become zero, what will the market area be?...
View Full Document
This note was uploaded on 02/17/2011 for the course ECON 432 taught by Professor Staff during the Spring '08 term at Pennsylvania State University, University Park.
- Spring '08