Motors co., believes it faces the following segmented demand function:
P = 150 - 0.5Q when 0 ≤ Q ≤ 50
P = 200 - 1.5Q for Q > 50
a) Indicate both verbally and graphically why such a segmented demand function is likely to exist. What type of industry structure is indicated by this relationship?
b) Calculate the marginal revenue functions facing Chillman. Add these to your graph from Part (a)
c) Chillman's total cost function is
TC1 = 500 + 15Q + .5Q2
Calculate the marginal cost function. What is Chillman's profit-maximizing price and output combination?
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