The Winston Tobacco Company Feels That It Is Faced with the Following

Essay

The Winston Tobacco Company feels that it is faced with the following segmented demand function for its cigarettes: where Q is the number of cartons sold and P is the price per carton.
(a)Why is such a segmented demand function likely to exist? What type of industry structure is indicated by this relationship?
(b)Determine Winston's marginal revenue function.
(c)Given that Winston's total cost function (including a "normal"return to the owners) is TC₁ = 80 + 2.6Q + .05Q² determine Winston's profit maximizing price and output level.
(d)Given that Winston's total cost function increases to TC₂ = 90 + 3.4Q + .05Q² what is their profit maximizing price and output level?