You have recently been hired in a firm that is the sole distributor of water to consumers in your country. You obtain the following information about the demand and production
costs:
Demand: P = 1,000 – 10Q
Marginal Cost: MC = 100 + 10Q
where Q indicates the number litres of water supplied and P is the price in dollars.
i. Find the price and quantity that maximizes the company’s profit. [5 marks]
ii. Now find the price and quantity that would be produced in a perfectly competitive
market.