Answer to Question #306901 in Microeconomics for anna

Question

Based on market research, a film production company in Ectenia obtains the following

information about the demand and production costs of its new DVD:

𝐷𝑒𝑚𝑎𝑛𝑑: 𝑃 = 1000 – 10𝑄

𝑀𝑎𝑟𝑔𝑖𝑛𝑎𝑙 𝑅𝑒𝑣𝑒𝑛𝑢𝑒: 𝑀𝑅 = 1000𝑄 – 10𝑄2

𝑇𝑜𝑡𝑎𝑙 𝐶𝑜𝑠𝑡: 𝑇𝐶 = 1000 − 20𝑄

𝑀𝑎𝑟𝑔𝑖𝑛𝑎𝑙 𝐶𝑜𝑠𝑡: 𝑀𝐶 = 100 + 10

Where, Q indicates the number of copies sold and P is the price in Ectenian dollars.

Answer 1

The maximization rule for

were for a competitive firm is to choose the volume of production at which price and marginal revenue equals marginal cost: P = M R = MC.

1000-20Q=100+10Q

30Q=900

Q=30

P=1000-300=700

$Profit=TR-TC=1000Q-10Q^2-(5Q^2+100Q)=1000\times30-10(30)^2-5(30)^2-100\times30=13500$