Monopoly equilibriumparvati fluid controls inc pfc is a, Ask an Expert

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Monopoly Equilibrium

Parvati Fluid Controls, Inc., (PFC) is a major supplier of reverse osmosis and ultrafiltration equipment, which helps industrial and commercial customers achieve improved production processes and a cleaner work environment. The company has recently introduced a new line of ceramic filters that enjoy patent protection. Relevant cost and revenue relations for this product are as follows:

TR = $300Q - $0.001Q2:

MR = DTR/DQ = $300 - $0.002Q TC = $9,000,000 + $20Q + $0.0004Q2:

MC = DTC/DQ = $20 + $0.0008Q

where TR is total revenue, Q is output, MR is marginal revenue, TC is total cost, including a risk- adjusted normal rate of return on investment, and MC is marginal cost.

A. As a monopoly, calculate PFC's optimal price/output combination.

B. Calculate monopoly profits and the optimal profit margin at this profit-maximizing activity level.

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