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The Industry demand function for bulk plastics is represented by the following equation: P=800-20Q
Where Q represents millions of pounds of plastic. The total cost function for the industry, exclusive of a required return on invested capital, is:
where Q represens millions of pounds of plastic
a. If this industry acts like a monopolist in the determination of price and output, compute the profits-maximizing level of price and output
b. What are the total profits at this price and output level?

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Solution Preview

Total Revenue (TR) = PQ
TR = PQ = (800-20Q)Q
TR = 800Q-20Q^2 (where "^" means "to the power of")

Marginal Revenue (MR) is the derivative of TR
MR = 800-2(20Q)
MR = ...

Solution Summary

This solution shows how to calculate the profit-maximizing output and price in an industry.