Scenario 12.2:
You are studying a market for which the kinked demand curve model applies. The kinked demand curve is as follows:
Q = 1200 - 5P for 0 $\impliedby$ Q

Question

Scenario 12.2:
You are studying a market for which the kinked demand curve model applies. The kinked demand curve is as follows:
Q = 1200 - 5P for 0 $\impliedby$ Q < 150
Q = 360 - P for 150 $\impliedby$ Q
The marginal cost is given as:
MC = Q
-Refer to Scenario 12.2. What is the profit maximizing level of output?

Quizplus · Accepted Answer

To find the profit maximizing level of output, we need to set marginal revenue equal to marginal cost. MR = dTR/dQ = (1200 - 10P) for 0 < Q < 150 MR = dTR/dQ = 360 - 2P for Q > 150 Setting MR equal to MC (Q) = Q, we get: (1200 - 10P)/10 = Q for 0 < Q < 150 360 - 2P = Q for Q > 150 Solving for P and Q in both equations and equating them, we get P = $180 and Q = 150. Therefore, the profit maximizing level of output is 150.

Scenario 12 ⟸ \impliedby⟸ Q < 150 Q = 360 - P for 150

Scenario 12 $\impliedby$ Q < 150
Q = 360 - P for 150