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What is the firm profit-maximizing quantity and price

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Reference no: EM13881086

A manufacturer of spare parts faces the demand curve,
P = 800 - 2Q,
and produces output according to the cost function, C = 20,000 + 200Q + .5Q2:

a. Create a spreadsheet modeled on the example shown.7 (The only numerical value you should enter is the quantity in cell B7. Enter appro- priate formulas to compute all other numerical entries.)

b. What is the firm's profit-maximizing quantity and price? First, deter- mine the solution by hand, that is, by changing the quantity value in cell B7. (Hint: Keep an eye on MR and MC in finding your way to the optimal output.)

c. Use your spreadsheet's optimizer to confirm your answer to part (a).

 

 

A

B

C

D

E

F

G

1

 

 

 

 

 

 

 

2

 

THE OPTIMAL OUTPUT OF SPARE PARTS

 

3

 

 

 

 

 

 

 

4

 

 

 

 

 

 

 

5

 

Quantity

Price

Revenue

Cost

Profit

 

6

 

 

 

 

 

 

 

7

 

20

760

15,200

24,200

-9,000

 

8

 

 

 

 

 

 

 

9

 

 

 

 

 

 

 

10

 

 

 

MR

MC

Mprofit

 

11

 

 

 

 

 

 

 

12

 

 

 

720

220

500

 

13

 

 

 

 

 

 

 

Reference no: EM13881086

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