Gotcha, the only seller of stun guns, faces the inverse market demand curve P = 400 - 12Q, where Q measures the number of stun guns per day and P is the price per stun gun. The marginal cost is constant at $64. Gotcha's profit-maximizing price is $____.

Question

Quizplus · Accepted Answer

To find the profit-maximizing price, first determine the quantity where marginal revenue equals marginal cost. The marginal revenue curve has the same intercept as the demand curve but twice the slope: MR = 400 - 24Q. Set MR equal to MC: 400 - 24Q = 64, solving gives Q = 14. Substitute Q = 14 into the demand curve to find the price: P = 400 - 12(14) = 232.

Gotcha, the Only Seller of Stun Guns, Faces the Inverse