Question #56994

Demand function is Q=1100-40P. Determine the quantity that results in maximum revenue

Expert's answer

Q=1100-40P, 40P = 1100 - Q, P = 27.5 - Q/40 - inverse demand function.

Total revenue is maximized, when marginal revenue MR = 0.

MR = TR' = (P*Q)' = (27.5Q - Q^2/40)' = 27.5 - Q/20

MR = 0, so 27.5 - Q/20 = 0,

Q/20 = 27.5

Q = 550 units.

Total revenue is maximized, when marginal revenue MR = 0.

MR = TR' = (P*Q)' = (27.5Q - Q^2/40)' = 27.5 - Q/20

MR = 0, so 27.5 - Q/20 = 0,

Q/20 = 27.5

Q = 550 units.

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