Determine the profit-maximizing output

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Reference no: EM133487189

Case: Consider the cost function:

TC(Q) = 1000 + 4Q2

for RussCo to produce its new Phone. Using that cost function for the Phone, determine the profit-maximizing output, price and profit for the RussCo Phone, and discuss its long-run implications, under three alternative scenarios:

Question 1: RussCo Phone is a perfect substitute with a similar product offered by Apple, Samsung and several other Phones that have similar cost functions and that currently sell for $800 each.

You must show your work. Keep in mind that in this example, the firm can make a profit since the market has dictated a price.

Question 2: RussCo Phone currently has no substitutes, and currently the demand for the RussCo Phone is Q = 108 - (1/5)P, but RussCo anticipates other firms can develop close substitutes in the future. - note you use the cost function (TC(Q) = 1000 + 4Q2).

Question 3: RussCo Phone has no substitutes and so is a monopolist, and the demand for the RussCo Phone is expected to forever be Q = 36 - (1/5)P - note you use the cost function (TC(Q) = 1000 + 4Q2).

You must show your work. If a firm loses money, why would it consider remaining open (remember fixed costs)

Reference no: EM133487189

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