Question

A firm faces the following profit function:                   p = 200 – 1/3Q3 + 5.5Q2 –...

A firm faces the following profit function:

                  p = 200 – 1/3Q3 + 5.5Q2 – 28Q

         Find Q which maximizes the firm’s profit.

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Answer #1

Given:

Differentiating the function w.r.t Q

Putting it equal to zero, we get:

Let us check the profit at both 4 units and 7 units

Case 1: 4 UNITS

CASE 2: 7 UNITS

Clearly profit is maximized at 7 units.

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