Illustrate what cost should each industry charge if it wants

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Reference no: EM1367836

Q. Assume rare three industries with same individual demand function. This function is Q = 1,000 - 40P. Assume each industry has a different cost function. se functions are:
Industry 1: 4,000 + 5Q
Industry 2: 3,000 + 5Q
Industry 3: 3,000 + 7Q

a) Illustrate what cost should each industry charge if it wants to maximize its profit (or minimize its loss)?

b) Why are costs and output of industries 1 and 2 same however different for industry 3?

c) Is fixed cost relevant in their cost determination or not?

d) Examine advantage and disadvantage of cost structure between industry 1 and industry 3.

e) Assume that cost falls as a result of a cost war. Two most likely costs as a result are $13 and $12. Which company, industry 1 or industry 3, is more vulnerable to cost war when P = $13?

f) Which company, industry 1 or industry 3, is more vulnerable to cost war when P = $12?

Reference no: EM1367836

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