Giant Screen TV, Inc., is a Miami-based importer and distributor of 60-inch scre

Question

Giant Screen TV, Inc., is a Miami-based importer and distributor of 60-inch screen HDTVs for residential and commercial customers. Revenue and cost relations are as follows:

TR = $1,800Q - $0.006Q^2

MR = TR/Q = $1,800 - $0.012Q

TC = $12,100,000 + $800Q + $0.004Q^2

MC = TC/Q = $800 + $0.008Q

          What independent variable is total cost a function of?

         What is your inverse demand (price) function?

           What is the rule for average cost-minimizing?

           What is the condition (rule) profit maximization?

Explanation / Answer

Quantity P= 1,800- 0.006Q Set derivative of average cost function to zero, solve for independent variable, and put solution back in average cost function to compute minimum average cost. Set MC=MR and solve for Q, This Q will give maximum profit (or minimum loss).

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