The industry demand function for bulk plastics is represented by the following equation:
– 20Q where Q represents millions of pounds of plastic.
The total cost function for the industry, exclusive of a required return on invested capital, is + 500Q + 10Q2 where Q represents millions of pounds of plastic.
If this industry acts like a monopolist in the determination of price and out-put, compute the profit-maximizing level of price and output. Assume that this industry is composed of many (500) small firms, such that the demand function facing any individual firm is P = $620
Compute the profit-maximizing level of price and output under these conditions (the industry’s total cost function remains uncharged).