- A small business which produces plastic vacuum-suction covers for round household dishes has a monopoly that is protected by a utility patent. The market demand curve for this product is estimated to be: Q = 6009 – 25P where Q is the number of plate covers per year and P is in dollars. Cost estimation processes have determined that the firm’s cost function is represented by TC = 120 + 2500Q -0.25*Q2.
(i) What is the profit-maximizing price and output level? Solve this algebraically for equilibrium P and Q and also plot the MC, D and MR curves and illustrate the equilibrium point.
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