Posted by **John** on Friday, November 17, 2006 at 3:37pm.

Suppose that Neptune Music has the copyright to the latest CD of the heavy Iron Band. The market demand schedule for the CD is:

Q = 800 – 100P.

Q represents quantity demanded measured in thousands of CDs and P represents the price in dollars. Production requires a fixed cost of $100,000 and a constant marginal cost of $2 per CD produced.

1.What price will maximize profits?

2.At the price you found in 1 above, how many CDs will be sold?

3.What is the maximum profit for the quantity and price you found above? level be in this case?

Here the function is demand Q=800-200P

Therefore,TR=PQ=800P-200P^2

MR=d(PQ)=800-2*200*P=800-400P

Here MC=2

Hence 800-400P=2

or -400P=-800+2=-798

or P=798/400=1.998

Again,Q=800-200P=800-200*1.995=389

Here Total cost(TC)=1000000+2*Q

Total Profit=TR-TC

Here the function is demand Q=800-200P

Therefore,TR=PQ=800P-200P^2

MR=d(PQ)=800-2*200*P=800-400P

Here MC=2

Hence 800-400P=2

or -400P=-800+2=-798

or P=798/400=1.998

Again,Q=800-200P=800-200*1.995=389

Here Total cost(TC)=1000000+2*Q(Most probably there is some mistake in the figure of total fixed cost)

Total Profit=TR-TC

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