Question

1. A monopolistically competitive firm is considering selling several units of the same product as a...

1. A monopolistically competitive firm is considering selling several units of the same product as a single package. A typical consumer's demand for the product is Q = 10 - 0.5P and the total cost function is C(Q) = 8Q. Optimal units per package is 6.

a. What is the optimal price to charge for the package?

b. What are the profits for this pricing scheme?

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Answer #1

Here the demand and cost functions represent functions of product package which consists of several units, optimally 6. So the optimal quantity obtained from the functions will represent the optimal quantity of the packages and it's profit maximizing market or optimal price to be charged for each package.

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