What price will the firm choose to maximize profits

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Question: Suppose the drug company is setting two different prices for two different periods. In the first period, the company will price low in order to build reputation/interest, and in the second period, they will capitalize on that. Demand for year 1 (Q1) and year 2 (Q2) are Q1=100-5P1 Q2=Q1/10 (100-5P2) In other words, the more you sell in the first year, the bigger the payoff in the second year. If the goal of the firm is to maximize total profits: Π=P1Q1+P2Q2. Hint: Start with year 2, treating Q1 As fixed. Then, find the Q1 That maximizes total profit. What price will the firm choose to maximize profits?

Reference no: EM133287648

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