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Question

Consider the following functions for a firm selling solar power units. TR = $5,000Q - $3.9Q^2MR = $ 5,000 - $7.8Q

TC = $100,000 + $1,160Q + $2.5Q^2


Slope of the AC curve = -100,000Q^(-2)+2.5


MC= $1,160 + $5Q


a) Calculate the equilibrium price and output for this firm as a monopolist (show workings).


b) Using the same total revenue and total cost functions calculate the long run equilibrium price and output if this firm was a monopolistically competitive firm with a differentiated product (show workings).


c) Compare and contrast productive and allocative efficiency under each market structure (monopoly and monopolistic competition with differentiation) for the total revenue and total cost functions provided (show workings).                                      (4 marks)

Step-by-step answer

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Subject: Business, Economics

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