Chapter 11: Problems 2,4,6

1. Ajax Cleaning Products is a medium-sized firm operating in an industry dominated by one large firm Tile King. Ajax produces a multi-headed tunnel wall scrubber that is similar to a model produced by Tile King. Ajax decides to charge the same price as Tile King to avoid the possibility of a price war. The price charged by Tile King is 20,000.

Ajax has the following short-run cost curve:

,000 - 5,000Q 100Q2.

A. Computer the marginal cost curve for Ajax.

B. Given Ajaxs pricing strategy, what is the marginal revenue function for Ajax?

Ajax Cleaning Products versus Tile King.

a. MC d(TC)/dQ 5000 200 Q

b. P MR 20,000

c.  MC  MR is profit maximizing output, where 5000  200 Q  20,000. Therefore, 200 Q  25,000, so     Q*  125.

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