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    Output, price, total revenue and total profit

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    P = $130 - $0.000125Q
    MR - $130 - 0.00025
    Fixed development cost = $600,000
    Marginal costs are $63 per unit.

    Calculate output, price, total revenue and total profit at the revenue maximizing activity level and then at the profit maximizing level (present each with relevant diagrams).

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    Solution Preview

    At the profit maximizing activity level,

    II = TR - TC,

    Here, II = 130Q - 0.000125Q^2 - 600,000 - 63Q
    = 67Q - 0.000125Q^2 - 600,000

    Now, setting the profit-maximizing level, from which any extra profit is not possible,

    dII / dQ = 67 - 0.00025Q* = 0
    II Q* = 67 / 0.00025 = 268,000

    where, II = Profit, TR = Total Revenue, TC ...

    Solution Summary

    The solutions uses the data given in the question and calculates output, price, total revenue and total profits. Relevant diagrams are also presented in the response. Step by step calculations have been provided which makes it really easy to follow along. A student downloading this solution can easily understand the concepts and then apply them to similar problems. Overall, an excellent response that provides clear and detailed explanation to the problem being asked.