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Question
The market structure of home video gaming systems is best characterized by monopolistic competition. Quasar Entertainment is one of the producers in this market. The inverse demand for Quasar systems is:P = 500 - 9.75Qd
The resulting marginal revenue curve is
MR(Qd) = 500 - 19.5Qd.
Quasar's cost function is:
C(Q) = 0.25Q2 + 6,250 MC(Q) = 0.5Q.
Determine Quasar's profit maximizing level of output and the price charged to customers. Is this a long-run equilibrium?
Answer
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