Two monopolistically competitive firms face the similar demand and total revenue functions however face different total cost functions. These demand, total revenue and cost functions are illustrated below.
P = 25 – 0.25Q
TR = 25Q – 0.25Q2
Total cost function of firm 1: TC1 = 4,000 + 5Q
Total cost function of firm 2: TC2 = 3,000 + 7Q
Q1. Determine the optimal (profit maximizing or cost minimizing) output of each firm.
Q2. Determine the price that each firm charges at if producing the optimal output.
Q3. Determine the total profit or loss of each and every firm at the optimal output.