How do you achieve the profit maximizing price?

Answer 1

Let the demand facing a firm for its product be expressed by the following functions Q=25-0.5P Where Q=quantity and P=price, and cost function as C=25-2Q+4Q2 Compute a) Profit maximizing output, b) Justify profit maximizing output

Answer 2

The profit maximization is a point where the price is at a level where one finds a balance between demand and supply and price below or above this point will cause an increase in demand or increase in supply respectively.

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Answer 3

Profit-maximizing price is found at the quantity where MR=MC, marginal revenue=marginal cost. You will have to graph both marginal revenue and marginal cost and find the point of intersection. That is the profit-max quantity, but then you will have to find its corresponding price. In perfect competition, price=marginal revenue, which is constant, but in an imperfect economy, you will have to find the demand at the profit-max quantity and find the corresponding price from the demand curve.