A monopolist faces a straight line demand curve which passes through the point Rs 10 per ton on the price-cost axis and through the point 8000 tons on the quantity axis.
The firm has an input limitation that comes into effect at 3000 tons, and its marginal costs are as follows:
Constant at Re. 1 per ton up to and including 3000 tons, increasingly by Re. 0.01 per ton for each ton beyond 3000.
(i) Find the profit maximizing output.
(ii) If the firm's input limitation is removed (but input prices are untouched) to what level of output will it expand?