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    Profit maximization with given demand and cost schedule

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    Firm has the following demand and cost schedule for a particular product:
    Q=200-5p

    TC=400+4Q

    a) At what price should this firm sell ist product?

    b) If this is a monopolistically competiive market, what do you thingk will start happening in th elong rung? Explain

    c) Suppose in the long-run, the demand shiffted to Q=100-5P. What should the firm do? Explan.

    MR
    MC
    TR
    TC
    Profit ...

    © BrainMass Inc. brainmass.com October 10, 2019, 2:24 am ad1c9bdddf
    https://brainmass.com/economics/demand-supply/profit-maximization-demand-cost-schedule-375600

    Solution Preview

    a)
    For profit maximization, set the prices where MC=MR
    Now:
    Demand equation Q=200-5P
    Write the equation for P, we get P=(200-Q)/5=40-0.2Q
    Total revenue TR = P*Q=(40-0.2Q)*Q
    Marginal Revenue MR=dTR/dQ = 40-2*0.2Q=40-0.4Q

    TC=400+4Q
    MC=dTC/dQ=4
    Equating MC to MR, we get 40-0.4Q=4
    0.4Q=36
    Q=90
    Substituting the value of Q, we get ...

    Solution Summary

    Shows how a firm can maximize its profits for a given demand and cost schedule for a monopolistically competitive market.

    $2.19