Samsung has a constant marginal cost of 20 and that market demand is given by Q= 600-5P. Find its optimal price and output and profit.

Answer 1

5P=600-Q
P=600-Q/5
MC=MR at profit maximization level
but TR=PQ
(600-Q/5)Q
TR=600Q-Q2/5
MR=600-2Q/5
MR=MC 600-2Q/5=20
600-2Q=20*5
600-100=2Q
500/2=2Q/2 Q=250

P=600-Q/5=600-250/5=70

Q=250
P=70
PROFIT=TR-TC
600-Q/5)Q-20*250
=12500