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Marginal Revenue & Profits

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A- A firm with market power produces widgets at a marginal cost of $10 per unit and zero fixed costs. It faces a demand function given by P = 50 - Q. What is the marginal revenue for the firm?

b- A firm with market power produces a chip at a marginal cost of $10 per unit and zero fixed costs. It faces a demand function given by P = 50 - Q. What are the profits of the firm at the optimal price and output combination?

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Solution Summary

The solution discusses the marginal revenue and profits.

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P = 50 - Q

Total Revenue at Q units = P x Q = 50Q - Q^2

Total Cost = 10Q

Total Profit = 50Q ...

Solution provided by:
Gaurav Agarwal, MS
Education
  • BE, Bangalore University, India
  • MS, University of Wisconsin-Madison
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