The names of the compagny is H20
A compagny of water production and distribution company is in a monopoly situation.
it's total cost function is given by:
CT (q) = q² + 10q
where q represents the quantities produced in millions of m ^ 3 of water.
She is faced with the following request
p = 50-4q
with p the price in cents.
Please answer the following question
a) Calculate the price, quantity and monopoly profit of H20
b) Represent the demand curves of average cost, marginal cost and marginal revenue of H20
c) H20 learns from the news that a potential entrant wants to enter the market by selling 5 units at a unit cost of 20.
Determine the price level below which H20 can set a limit price
Then check whether the monopoly price calculated in question 1 can be considered a limited price
d) Would H20 remain profitable if the entrant were to enter the market anyway ? (for this you have to calculate the market price that will rise as a result of the entry of the competitor)
e) The entrant finally decides to attack the demand not served by H20 assuming that H20 will maintain its monopoly price calculated in question 1.
Calculate the entrant's residual demand, it's marginal revenue and the price that maximizes its profit.
Is H20 monopoly price still a limit price here ?
f) Propose another price limit level for H20 that would dissuade entry