How do you find profit maximizing price given a marginal cost curve and a demand curve?
From the demand curve, we find MR and equate it with MC. We get equilibrium quantity, when we put value of Q in demand curve equation we get equilibrium price.
Example; Demand function, Q = 40 - P and MC = 10
Q = 40 - P
P = 40 - Q
TR = PQ = (40 - Q)Q = 40Q - Q2
MR = 40 - 2Q
MC = 10
Equilibrium condition; MR = MC
40 - 2Q = 10
2Q = 30
Q = 15 units
P = 40 - 15
P = $ 25
How do you find profit maximizing price given a marginal cost curve and a demand curve?
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