Economics Assignment: Market Demand and Total Cost Function

Running head: ECONOMICS ASSIGNMENT
Economics Assignment
Name of the Student
Name of the University
Course ID

1ECONOMICS ASSIGNMENT
Given market demand function
P=2000−2 QS −3Qt
The respective total cost function of firm ‘s’ and firm ‘t’ are given as
TCS=10000+ 4 QS +0.45 QS
2
TCt=60,000+ 2Qt +0.25 Qt
2
For firm s,
Total revenue is given as
TRS=QS × P
¿ QS × ( 2000−2 QS −3 Qt )
¿ 2000 QS −2QS
2−3 Qt QS
From the total revenue, marginal revenue for firm s is obtained as
MRs= d ( TRs )
d Qs
¿ ∂ ¿ ¿
¿ 2000−4 Qs−3 Qt
From the given total cost function, the marginal cost for firm s is obtained as
MCs =d ( TCs )
d Qs

2ECONOMICS ASSIGNMENT
¿ ∂(10000+ 4 QS + 0.45QS
2 )
∂ Qs
¿ 4 +0.90 Qs
Profit maximization condition of firm s requires,
MRs=MC s
¿ , 2000−4 Qs−3 Qt=4+ 0.90 Qs
¿ , 2000−4 Qs−3 Qt−4−0.90 Qs =0
¿ , 1996−4.90 Qs−3Qt =0
¿ , 4.90 Qs=1996−3Qt
¿ , Qs= 1996−3 Qt
4.90
¿ , Qs=407.35−0.61Qt
The reaction function of firm s thus is given as
Qs =407.35−0.61 Qt
Qs =407.35−0.61 Qt..........................................................................(i)