A) If two companies are in perfect competition having monopoly in a competitive market, marginal cost can be used as the in monopolistic competition two or three companies are making same product and the demand is certain both companies can use marginal costing and profit maximization level of output can be achieved by using below formulas and if the demand is split how it will affect the profit will also be discussed

P= 180 -0.5Q       

MC = 30

Fc = 1000

TC= 1000 + 30Q

TC= Total Cost

FC = Fixed Cost

MC= Marginal Cost

a. Profit maximizing level of output is attained where the marginal revenue equals the marginal cost.

TR = P * Q

TR= Total Revenue

P= Price

Q = Quantity

TR = (180 - 0.5Q) *Q

TR = 180Q - 0.5Q².

MC = 30.

MR = MC,

30 = 180 – Q

Profit Maximizing level of output

Q = 150 units.

P = 180 - 0.5*150

P = $105.

Maximum Profit

Selling price – MC = MR

105-30 = 75

Units x Price

150*75 = $11250

b)

Here, it has been assumed that there is another firm in our industry which has started the business, and it will affect our strategy of business to manage this competition. So, it has been decided that both companies will not give competition to each other and split the market to avoid competition and it will help both to manage the good price rather competing with each. In this case, both companies will have same profits as market is split between both equally.

Each Firms profit when demand it split equally between two

75*75 = $5625 Each Firms Profit

Fixed Cost Allocation

$5625-1000= $4625

c)

Earlier our company decided to split the market share between both companies to avoid competition, but in this case our company was not happy with end profits, so strategy was changed to aggressive and 1$ sale price was reduced to have more sales and market share. In this case, our company will have better profits than last one and also from the rival.

Our price will be $104 – MC =30 which means MR per unit $74

74*75= $5550

Fixed cost allocation at the price of 74

5550-1000= $4550

Rivals profit 75*75 – 1000 = $4625        

d)      Payoff Matrix

Firm A                                    Firm B

Low                             High    Low                 High

a)      No the result for consumers is not beneficial as monopoly and duopoly is always result in high prices of customers due to high demand and low competition. It will benefit companies more and consumer will suffer of high prices.