Question

The demand curve for Bruins caps is p= = 2400/√q

The Bruins incur a marginal cost MC=6 and a fixed cost F=100,000 when they produce caps.
(i) Find the profit-maximizing price and quantity of caps.

Answer 1

To find the profit-maximizing price and quantity of caps, set the marginal revenue equal to marginal cost. The profit-maximizing price is $120 and the quantity is 400 caps.

Step-by-step explanation:

To find the profit-maximizing price and quantity of caps, we need to equate the marginal revenue (MR) to the marginal cost (MC). The MR curve is the demand curve, which is given as p = 2400/√q. The MC is given as 6. We can find the profit-maximizing quantity by setting MR = MC:

2400/√q = 6

Solving for q, we get q = 400.

The profit-maximizing price can be found by substituting q = 400 into the demand curve:

p = 2400/√400 = 2400/20 = 120.

Therefore, the profit-maximizing price is $120 and the quantity is 400 caps.