# Demand and Cost Functions

6. You are the manager of a monopoly, and your demand and cost functions are

given by P = 480 - 8Q and C(Q) = 500 + 4Q2, respectively.

- What price-quantity combination maximizes your firm's profits

- Calculate the maximum profits.

- Is demand elastic, inelastic, or unit elastic at the profit-maximizing price

quantity combination?

- What price-quantity combination maximizes revenue?

- Calculate the maximum revenues.

https://brainmass.com/economics/monopolies/demand-and-cost-functions-of-a-monopoly-374262

#### Solution Preview

(a) R(Q) = PQ = (480 - 8Q)Q = 480Q - 8Q^2

Profit = R(Q) - C(Q) = 480Q - 8Q^2 - 500 - 4Q^2 = -12Q^2 + 480Q - 500

For maximum profit, the derivative of the profit function = 0

-24Q + 480 = 0

Therefore Q = 20

P = 480 - 8(20) ...

#### Solution Summary

This solution shows all the steps for calculating a series of problems based on a companies demand and cost functions.