the weekly demand fir firm’s energy drink was estimated to be Qd = 2000 - 1000P

Question

the weekly demand fir firm’s energy drink was estimated to be Qd = 2000 - 1000P where Q = quantity of 12 (600 ml sizes plastic bottles in thousands) P= Price per container. Tc = 150+0.25q i.e total cost per week (in thousands of dollars), (i) Calculate quantity ( ii) what price should the firm charge if it want to maximise profit? the weekly demand fir firm’s energy drink was estimated to be Qd = 2000 - 1000P where Q = quantity of 12 (600 ml sizes plastic bottles in thousands) P= Price per container. Tc = 150+0.25q i.e total cost per week (in thousands of dollars), (i) Calculate quantity ( ii) what price should the firm charge if it want to maximise profit? the weekly demand fir firm’s energy drink was estimated to be Qd = 2000 - 1000P where Q = quantity of 12 (600 ml sizes plastic bottles in thousands) P= Price per container. Tc = 150+0.25q i.e total cost per week (in thousands of dollars), (i) Calculate quantity ( ii) what price should the firm charge if it want to maximise profit? the weekly demand fir firm’s energy drink was estimated to be Qd = 2000 - 1000P where Q = quantity of 12 (600 ml sizes plastic bottles in thousands) P= Price per container. Tc = 150+0.25q i.e total cost per week (in thousands of dollars), (i) Calculate quantity ( ii) what price should the firm charge if it want to maximise profit?

Explanation / Answer

Differentiating TC = 150+0.25q with respect to q we get MC = 0.25

Now, TR = q(2000 -q)/ 1000

or, TR = [2q - (q2 / 1000)]

Differentiating TR with respect to q we get MR = (2 - q/500)

Now MC=MR or, 0.25 = (2 - q/500)

q = 875

From the demand equation we get 875 = 2000 - 1000P

or, P = $1.125

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