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Question
The market structure of the local boat industry is best characterized by monopolistic competition. Homer's Boat Manufacturing is one of the producers in the local market. The demand for Homer's Boats is:Qd = 5000 - P P = 5000 - Qd.
The resulting marginal revenue curve is
MR(Qd) = 5000 - 2Qd.
Homer's cost function is:
C(Q) = 3Q2 MC(Q) = 6Q.
Determine Homer's profit maximizing level of output and the price charged to customers. Is this a long-run equilibrium?
Answer
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