Question

Demand for earbuds is represented by: P = 402 – 2Q The costs are $8 per set of earbuds. In order to stock earbuds, other items which average $2 in profit must be taken off the shelf. How many earbuds should you order?

Answer 1

Answer:

Q is 98

Explanation:

Marginal (average) cost (including opportunity cost) = $8 + $2 = $10

Profit is maximized when MR = MC = 10.

P = 402 - 2Q

Total revenue (TR) = P x Q = 402Q - 2Q^2

MR = dTR/dQ = 402 - 4Q

Equating with MC,

402 - 4Q = 10

4Q = 392

Q = 98