Homework answers / question archive / Fuji is the sole manufacturer of racing bikes, and the cost of manufacturing is TC(Q)=120+15Q+2Q2TC(Q)=120+15Q+2Q2 so that the marginal cost is MC(Q)=15+4QMC(Q)=15+4Q

Fuji is the sole manufacturer of racing bikes, and the cost of manufacturing is TC(Q)=120+15Q+2Q2TC(Q)=120+15Q+2Q2 so that the marginal cost is MC(Q)=15+4QMC(Q)=15+4Q

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Fuji is the sole manufacturer of racing bikes, and the cost of manufacturing is TC(Q)=120+15Q+2Q2TC(Q)=120+15Q+2Q2 so that the marginal cost is MC(Q)=15+4QMC(Q)=15+4Q. Demand for racing bikes is characterized by P=132−4QP=132−4Q.

a. What is the optimal level of production and price for Fuji?

b. The production of the bikes produces pollution so that the additional externality cost is MCEX(Q)=5+4QMCEX(Q)=5+4Q. What is the social marginal cost of production of bikes?

c. What would be the social optimal level of production?