Jay\'s Silk Printing Co. is located in a small university town. The major portio

Question

Jay's Silk Printing Co. is located in a small university town. The major portion of their business is custom printed sweatshirts for university bookstores. As a sideline, they also retail sweatshirts locally. The local demand for sweatshirts is: Q = 200 - 5P. The average marginal cost per printed sweatshirt is $8.00. a. Calculate the output, price, and profit under the monopoly conditions they enjoy locally. b. To test other markets, they contemplate opening retail outlets in several university towns where there will be numerous competitors, Calculate price and output under these perfectly competitive conditions. c. Compare the competitive and the monopoly price and toutput situations. loss.

Explanation / Answer

revenue =P*Q.........where P = 40 - Q/5 =40Q-Q^2/5 MR =40-2Q/5 MR =MC for monopoly 40-2Q/5 =8 hence Q =80 hence P =24 //////// for competitive market price =MC 40-Q/5 =8 hence Q=160 P =8..

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