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    What is the profit-maximizing price for a new product?

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    A manufacturer of electronic products has just developed a handheld computer. Following is the cost schedule for producing these computers on a monthly babsis. Also included is a schedule of prices and quantities that the firm believes it will be able to sell (baseed on previous market research).

    Q Price MR AVC AC MC
    0 $1,650
    1 $1,570 $1,570 $1,281 $2,281 $1,281
    2 $1,490 $1,410 $1,134 $1,634 $987
    3 $1,410 $1,090 $1,009 $1,342.33 $759
    4 $1,330 $1,090 $906 $1,156 $597
    5 $1,250 $930 $825 $1,025 $501
    6 $1,170 $770 $766 $932.67 $471
    7 $1,090 $610 $729 $871.86 $507
    8 $1,010 $450 $714 $839 $609
    9 $930 $290 $721 $832.11 $777
    10 $850 $130 $750 $850 $1,011

    a. What price should the firm charge if it wants to maximize its profits in the short run?

    b. What arguments can be made for charging a price higher than the profit-maximizing price? What exactly price would you recommend? Explain.

    c. What arguments can be made for charging a lower than the profit-maximizing price? What price from the available prices do you recommend? Explain.

    Solution Guide
    1. Use the marginal rule (MR=MC) to determine the profit-maximizing price.
    2. Total revenue is maximized when MR=0.

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    https://brainmass.com/economics/principles-of-mathematical-economics/what-is-the-profit-maximizing-price-for-a-new-product-229035

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    A manufacturer of electronic products has just developed a handheld computer.
    Following is the cost schedule for producing these computers on a monthly basis. Also included is
    a schedule of prices and quantities that the firm believes it will be able to sell (based on previous market research).

    Q Price MR AVC AC MC Total Revenue Total Cost Profit
    0 $1,650
    1 $1,570 $1,570 $1,281 $2,281 $1,281 $1,570 $2,281 ($711)
    2 $1,490 $1,410 $1,134 $1,634 $987 $2,980 $3,268 ($288)
    3 $1,410 $1,090 $1,009 $1,342.33 $759 $4,230 $4,027 $203
    4 $1,330 $1,090 $906 $1,156 $597 $5,320 $4,624 $696
    5 $1,250 $930 $825 $1,025 $501 $6,250 $5,125 $1,125
    6 $1,170 $770 $766 $932.67 $471 $7,020 $5,596 $1,424
    7 $1,090 $610 $729 $871.86 $507 $7,630 $6,103 $1,527
    8 $1,010 $450 $714 $839 $609 $8,080 $6,712 $1,368
    9 $930 $290 ...

    Solution Summary

    This solution looks at profit maximization price in 450 words. Total Revenue, Total Cost and Profit are calculated in an attached Excel file.

    $2.19