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Ajax Cleaning Products is a medium-sized firm operating in an industry dominated by one large firm—Tile King. Ajax produces a multiheaded 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:
TC = 800,000 − 5,000Q + 100Q2
a. Compute the marginal cost curve for Ajax.
b. Given Ajax’s pricing strategy, what is the marginal revenue function for Ajax?
c. Compute the profit-maximizing level of output for Ajax.
d. Compute Ajax’s total dollar profits.
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