Homework Answers
The firm maximizes profit when MR =MC
TR = PQ = (125-0.02Q)*Q
=> MR = dTR/dQ = 125 - 0.04Q
C = 45Q + 20000
=> MC = 45
Thus, at profit max, we have 125 - 0.04Q = 45
=> 0.04Q = 80
=> Q = 80/0.04 = 2000
Thus, P = 125 - 0.02*2000 = 85 cents
Total profits = TR - C = 2000*85 - 45*2000 - 20000 = 60000 cents = $600
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