469-CH2-MATH

469-CH2-MATH - $95.75 II TO MAXIMIZE PROFITS SET MR = MC...

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SUMMARY OF THE MICROCHIP EXAMPLE Given the Demand Equation , Q = f (P): Q = 8.5 - .05P Calculate the Inverse Demand Equation: .05 P = 8.5 - Q 20 (.05 P) = (8.5 - Q ) 20 P = 170 - 20 Q Solve for, TR, MR and MC TR = P x Q TR = (170 - 20Q) Q TR = 170 Q - 20 Q 2 TC = 100 + 38Q [ FC = $100 and VC = $38] MR = 170 - 40Q MC = $38 I. TO MAX SLS (TR): SET MR = 0, SOLVE FOR Q 0 = 170 - 40Q 40Q = 170 and Q = 4.25 P = 170 - 20 (4.25) = P = $85 TR = P x Q = 4.25 x $85 = $361.25 TC = 100 + 38 (4.25) = $261.50 Π = TR - TC =
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Unformatted text preview: $95.75 II. TO MAXIMIZE PROFITS, SET MR = MC, SOLVE FOR Q* MR = MC 170 - 40Q = 38 40Q = 132 Q* = 3.3 Solve for P*: P = 170 - 20 (3.3) = $104 Solve for TR: TR = P x Q = $104 x 3.3 = $343.20 Solve for TC: TC = 100 + 38 (3.3) = $225.40 Solve for = $343.2 - 225.4 = $117.80 III. TO MAXIMIZE PROFITS: SET MP = 0, SOLVE FOR Q* = TR - TC = (170 Q - 20 Q 2 ) - ( 100 + 38Q) = 170 Q - 20 Q 2- 100 - 38Q = -100 + 132 Q - 20 Q 2 MP = 132 - 40Q 0 = 132 - 40Q 40Q = 132 Q* = 3.3...
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This note was uploaded on 11/18/2011 for the course ECON 300 taught by Professor Gang during the Fall '06 term at Rutgers.

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469-CH2-MATH - $95.75 II TO MAXIMIZE PROFITS SET MR = MC...

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