# Profit maximization with given demand and cost schedule

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 ...

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.