Refer to Scenario 12.3. Suppose that the marginal cost increases such that: MC = Q + 10
What is the profit maximizing price?

Question

Quizplus · Accepted Answer

To find the profit maximizing price, we need to set the marginal revenue equal to the marginal cost. From the scenario, we know that MR = 420 - 2Q. Setting this equal to Q + 10 (the new MC), we get:

420 - 2Q = Q + 10
410 = 3Q
Q = 136.67

Substituting this back into the demand equation, we get:

P = 420 - 2(136.67) = 146.66

Thus, the profit maximizing price is $210.