Question

Answer the following question with a clear explanation. Show any steps or processes used to reach the answer.

Currently, the demand equation for pet hamsters is Q = 40 – 3P. The current price is $10 per pet hamster. Is this the best price to charge in order to maximize revenues? If not, what is?

PLS DO NOT PASTE PICTURES.

Answer 1

I order to find the price which maximizes revenue we need to find MR

So,
TR = Q*P
= (40-P)P
=40P-3P^2

Differentiating TR function we get MR function =40-6P
6P=40
P = 40/6 = 6.67 =7

So, profit gets maximized at a price of $7

This can also be proved by the following table

P	Qd	TR=Q*P
0	40	0
1	37	37
2	34	68
3	31	93
4	28	112
5	25	125
6	22	132
7	19	133
8	16	128
9	13	117
10	10	100
11	7	77
12	4	48
13	1	13