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Report Thread starter 1 year ago
A cosmetics company operates as a monopolist. The demand curve it faces for its anti-ageing creams is

𝑄 = 200 − 𝑃

The firm’s cost function is

𝐶(𝑄) = 1,500 + 40𝑄

The quantity, 𝑄, is measured in thousand units and the price, 𝑃, is in pounds.
a) Find the equilibrium price and quantity and the optimal profits. Draw the graph.
b) Assume now that there is a capacity constraint 𝑄 = 50. Write the condition under
which the firm will continue increasing its output. What is the profit maximizing price and output in this case? What are the profits? Should the cosmetics company continue to operate, why (not)?
c) The cosmetics company managed to separate its customers into two groups (under 40 and above 40) and knows each group’s demand function. The under 40 group has the demand function:
𝑄 =200−𝑃 11
The above 40 group has the demand function:
The cost function is still
𝑄 = 250 − 0.25𝑃 22
𝐶(𝑄) = 1,500 + 40𝑄
Where 𝑄 = 𝑄1 + 𝑄2.
In order to increase its profits, the company decided to use price discrimination. Find the optimal price and quantity sold to each group and the profits realized in each group. Find the total profits and quantity sold. Why does the company charge a different price in each group? Explain in detail.
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Report Thread starter 11 months ago
Can anyone helppppp its urgent

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