The demand for a monopoly seafood restaurant’s lunch is estimated to be: Q = 200 – P Assume TC = 10Q What price and quantity maximize profit assuming the firm charges the same price to all customers? Show all work. Draw the graph to illustrate.

1. The demand for a monopoly seafood restaurant’s lunch is estimated to be:

Q = 200 – P

Assume TC = 10Q

• What price and quantity maximize profit assuming the firm charges the same price to all customers? Show all work. Draw the graph to illustrate.

2. Now suppose a second seafood restaurant opens across the street. There are now two firms. The products are differentiated so that

Demand for firm 1’s product:  Q₁ = 100 – p₁ +(1/2)p₂

Demand for firm 2’s product: Q₂ = 100 – p₂ + (1/2)p₁

And TC₁ = 10Q₁; TC₂ = 10Q₂

Assuming both firms behave as Bertrand duopolists, solve for p₁ and p_2.  Show all work. Graph the reaction functions.

3) Suppose that in response to the presence of a superior competitor, firms polished its image and improved. As a result:

Demand for firm 1’s product:  Q₁ = 160 – p₁ +(1/2)p₂

Demand for firm 2’s product: Q₂ = 160 – p₂ + (1/2)p₁

              And TC₁ = 20Q₁; TC₂ = 20Q₂

Assuming both firms behave as Bertrand duopolists, solve for p₁ and p_2.  Show all work. Graph the reaction functions.