Profit if the monopoly chooses to sell a low-quality product

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Reference no: EM13771123

A monopolist faces a price function given by P = z(36 - 2Q), where P is price, Q is total output and z is the quality of product sold, which can take on only two values. The monopolist can choose between a low quality product z = 1 or a high-quality product for which z = 2. We assume that marginal cost is is constant at zero. Fixed cost, however, depends on the product design and increases with the quality chose. Specifically, fixed cost is equal to 65z^(2) .

(a) Calculate the profit if the monopoly chooses to sell a low-quality product.

(b) Calculate the profit if the monopoly chooses to sell a high-quality product.

Reference no: EM13771123

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Profit if the monopoly chooses to sell a low-quality product : A monopolist faces a price function given by P = z(36 - 2Q), where P is price, Q is total output and z is the quality of product sold, which can take on only two values. The monopolist can choose between a low quality product z = 1 or a high-quality ..

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