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Marginal Revenue and Profit Maximization

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The Smith Company's demand curve for the company's product is P= 2,000 - 20Q, where P = price and Q = the number sold per month.

a. Derive the marginal revenue curve for the firm.

b. At what output is the demand for the firm's product price elastic?

c. If the firm wants to maximize its dollar sales volume, what price should it charge?

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Solution Summary

Equations on calculating Marginal Revenue and profit maximization point.

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Price = 2,000 - 20Q

a) Marginal Curve = it is the change in total revenue as the unit quantity sold changes. The calculation for marginal revenue is the first derivative of = d(TR) / ...

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