Question

Ndou Drilling company has total cost function is TC=25Q2+30Q-55, and their marginal cost function is MC= 50Q+30, with demand of P=150-15Q, and whose marginal revenue function MR= 150-30Q, where Q is output and P is price.

Assume that the firm maximizes profit but cannot practice price discrimination



How much does the firm charge?

Answer 1

$MC= 50Q+30$

$MR= 150-30Q$

Then, set MR = MC to solve for Q:

$50Q+30= 150-30Q$

$50Q+30Q= 150-30$

$80Q= 120$

$Q=1.5$

When Q = 1.5, then $P=150-15Q$

$P=150-15*1.5$

P= $$127.50$