for clarification of the last paragraph of Question 3.The firm's contract requires that the total...

Question

for clarification of the last paragraph of Question 3.The firm's contract requires that the total number of items should be 15 (either all Good 1 or all Good 2 or some of each).

David · Accepted Answer

Answer 1: 
Demand function:   Q = 1000       
Inverse Demand function: 
Taking natural logarithm on both sides, we get: 
lnQ = ln1000 – 0.2P 
lnQ = 6.91 – 0.2P 
P = 34.55 – 5lnQ 
Profit condition: 
Profit = Q [34.55 – 5lnQ] – 2Q-100 
First order condition: 
34.55 – 5[lnQ+1]-2 = 0 
5lnQ = 27.55 
lnQ = 5.51 
Q = 247.15 
P = 34.55-5lnQ 
P = 34.55-5*5.51 
P = 7 
Second order condition: 
Differentiating   34.55 – 5[lnQ+1]-2, we get:

for clarification of the last paragraph of Question 3. The firm's contract requires that the total number of items should be 15 (either all Good 1 or all Good 2 or some of each).

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