Question

A firm faces the demand curve: P = 2,241 - 19Q. What is the firm’s revenue maximizing price? Enter as a value (round to two decimal places if necessary)

Answer 1

The demand curve is given as:

P = 2,241 - 19Q

The total revenue is the product of price and quantity. So,

TR = PQ = (2,241 - 19Q)(Q) = 2,241Q - 19Q²

The revenue is maximized by putting the marginal revenue equal to zero. So,

MR = d(TR)/dQ = 2,241 - 38Q

Putting the marginal revenue equal to zero:

2,241 - 38Q = 0

38Q = 2,241

Q = 2,241/38 = 58.974

Putting Q = 58.974 in the demand function:

P = 2,241 - 19(58.974) = 1,120.50

So, the firm will charge a price of $1,120.50 (approximately) to maximize the revenue.

answered by: anonymous