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. 1. Find all three stationaries (i.e., critical) point (s*, q*) of the monopolistís proÖt maximization problem. 2. Use the determinantal test to check whether the stationary points is the firm local maximum, global maximum, local minimum, global minimum, or neither.

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. 1. Find all three stationaries (i.e., critical) point (s, q) of the monopolistís proÖt maximization problem. 2. Use the determinantal test to check whether the stationary points is the firm local maximum, global maximum, local minimum, global minimum, or neither.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter14: Monopoly

Section: Chapter Questions

Problem 14.5P

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