A utility company faces demand given by q = 40

Question

A utility company faces demand given by q = 40 - 0.1p, where p is the price per unit.
If the company charges only one price, the output that maximizes revenue is ____.
A) 20
B) 17
C) 12
D) 10

Quizplus · Accepted Answer

To maximize revenue, set marginal revenue (MR) equal to zero. Revenue R = pq = p(40 - 0.1p). Differentiate R with respect to p, set dR/dp = 0, solve for p, and substitute back into the demand equation to find q. The calculation shows q = 20.