The value of that maximize the profit, und determine the corresponding price and total profit for the level of production is $52,500
Given,
Suppose that the demand equation for a monopolist is p=100−.02x and the cost function is C(x)=20x+10,000. Find the value of x that maximizes the profit and determine the corresponding price and total profit for this level of production.
Here we need to find the value of that maximize the profit.
As per the Monopolist maximizes profit by setting marginal costs (MC) equal to marginal revenue (MR).
Here the Marginal revenue is the first partial derivative of Total revenue (TR) function.
And the total revenue is the quantity (X) times price (P):
TR = P⋅X
=> (100−0.01X) X
=> 100X−0.02X
Then we get get marginal cost, take the partial derivative of the cost function with respect to x:
=> MC=∂c(X)/∂X:50
=> MR=MC/100−0.02X=50/100−50
=> 0.02X
=> 2500units
Then the price of X, plug in the value of x in the inverse demand function and solve for price:
=> P=100−0.01(2500)=$75
And the profit is the difference between Total revenue and Total costs:
=> ∏=TR−TC/TR = P⋅X
=> $75 × 2500 = $187,500
Finally, the total costs, plug in the value of x in the total cost function:
=> TC = 50(2500)+10,000
=> $135,000
=> ∏ = $187,500−$135,000
=> $52,500
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