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Compute the optimal output of each firm and the price

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Suppose two monopolistically competitive firms face same price and marginal revenue functions but face different cost functions. These functions are given below. P = 750 - 2.5Q MR = 750 - 5Q Firm 1: TC = 700 + 5Q + 3.5Q2(squared) MC = 5 + 7.0Q Firm 2: TC = 1100 + 10Q + 4.5Q2(squared) MC = 10 + 9.0Q

a. Compute the optimal output of each firm and the price that each firm should charge.

b. Compute the economic profit earned by each firm.

c. Briefly explain why the profit earned by each firm is different while both face same price and revenue functions?

d. Will these firms be able to maintain their respective excess economic profits in the long run?

Reference no: EM132445140

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