Find profit-maximizing choice of q for smith

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Q. 2. Smith is owner of a sole mineral water spring in an isolated economy. It costs Smith $2 per gallon to get his water bottled. Inverse demand curve for Smith's water is p = 20 - q / 5 , where p is price per gallon and q is number of gallon sold.

a. Write down an expression π(q ) for profits as a function of q. Find profit-maximizing choice of q for Smith and corresponding price and profit.

b. Suppose now Henry, Smith's neighbour, finds also a mineral spring that produces mineral water just as good as Smith's, but it costs Henry $6 a bottle. Total market demand remains as before. Determine Cournot duopoly equilibrium.

Reference no: EM1369562

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