Use second order conditions to find the firm maximum

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Reference no: EM131094684

The demand price for a monopolistic firm’s product is a function of quantity q and quality s: P(s,q) = s(a – bq) , while the firm’s production cost is a function of quality s only: C(s, q) =0.5s^2 .

a) Find all critical points (s,q) of the monopolist’s profit maximization problem.

b) Use the second order conditions to find the firm’s (local) maximum.

Reference no: EM131094684

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