P=5000–0.05Q,
MR = MTR/MQ = 5,000 - 0.1Q
FC = 0, AVC = RM4,000 per unit.
a) The profit-maximizing price and output combination is in the point where MR = MC = P, so:
MC = TC' = (FC + VC)' = (0 + 4,000Q)' = 4,000.
5,000 - 0.1Q = 4,000,
Q = 10,000 units.
P = MR = 5,000 - 0.1*10,000 = RM4,000.
Economic profits are:
TP = (P - ATC)*Q = (4,000 - 4,000)*10,000 = 0.
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