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What price-quantity combination maximizes revenue

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Reference no: EM13222820

You are the manager of a monopoly and your demand and cost functions are given by P = 200 - Q and C(Q) = 2,000 + 3Q^2, respectively. I answered a & b, just need help with the others.

a. What price-quantity combination maximizes your firm's profits?
Profit-maximizing condition
MR = MC

TR = P * Q
TR = (200 -2Q)*Q
TR = 200Q - 2Q^2

MR = 200 - 4Q
MC = 6Q

MR = MC
200 - 4Q = 6Q
10Q = 200
Q = 20 units

P = 200 - 2Q
P = 200 - 2 * 20
P = 200 - 40
P = $160

b. Calculate the maximum profits.
p=TR-TC
= 160 * 20 - (2,000 + 3 * 20^2)
= 3,200 - 3,200
= 0

c. Is demand elastic, inelastic, or unit elastic at the profit-maximizing price-quantity combination?
d. What price-quantity combination maximizes revenue?
e. Calculate the maximum revenues.
f. Is demand elastic, inelastic, or unit elastic at the revenue-maximizing price-quantity combination?

Reference no: EM13222820

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