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Monopolistic Competition Assignment
Linear
a) Assume O < B < 1
Find Number of customer at this Tire shop
Calculate monopoly price and profit
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Solution:
There is one shop located in the middle and the consumers are uniformly located in the interval (0,1) and let the length of the road be 1.
The number of consumers will be demand from both the ends which will be equal as the shop is located in the middle:
Demand from left side=1/2=Demand from right side
Number of consumers=1/2+1/2=1
Price will be one=1((3*1-1/2+1/2))/3=1
Profit=B-c-p=B-2<0 as B is between 0,1
b) Assume B> 1
Find Number of customer at this Tire shop
Calculate monopoly price and profit
Solution:
Now the value of B is greater than 1.
The number of consumers will be demand from both the ends which will be equal as the shop is located in the middle:
Demand from left side=1/2=Demand from right side
Number of consumers=1/2+1/2=1
Price will be one=1((3*1-1/2+1/2))/3=1
Profit=B-c-p=B-2<0 as B is greater 1 but less than 2
Profit=B-c-p=B-2=0 as B=2
Profit=B-c-p=B-2<0 as B is greater 2
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