Homework Answers
a) Given that demand function is P = 500 - Q and C = 6000 + 4Q^2
Profit = revenue - cost
= PQ - C
= (500 - Q)Q - 6000 - 4Q^2
= 500Q - 6000 - 5Q^2
Profits are maximized when marginal profits are zero
500 - 10Q = 0
Q = 50 units
P = 500 - 50 = $450
Hence profit maximizing price is $450 per unit and quantity is Q = 50 units
b) Profits are maximized at = 500x50 - 6000 - 5x(50^2) = $6500.
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