Explore BrainMass
Share

Explore BrainMass

    profit-maximizing price

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Suppose a typical consumer's inverse demand function for bottled water at a resort area where one firm owns all the rights to a local spring is given by P = 15 - 3Q. The marginal cost for gathering and bottling the water is $3/gal. Find the optimal number of bottles to package together for sale and the profit-maximizing price to charge for the package. Find the solution and show it graphically.

    © BrainMass Inc. brainmass.com October 9, 2019, 7:47 pm ad1c9bdddf
    https://brainmass.com/economics/macroeconomics/profit-maximizing-price-inverse-128990

    Solution Preview

    The marginal revenue is MR = 15 - 6Q. To max its profit, the firm should produce at the level that MR = MC, i.e.,
    15 - 6Q = 3
    solve for Q = ...

    Solution Summary

    The expert identifies the profit-maximizing price. The inverse demand function is determined.

    $2.19