The market demand for MP3 player is p = 50

Question

The market demand for MP3 player is p = 50 - 0.5Q,and the marginal cost for a MP3 player is $10.If Nick receives 60% of the total profit,then
A) Nick will produce 50 MP3 players.
B) Nick receives $500 as profit.
C) total profit is $800.
D) the efficiency in production is not achieved.

Quizplus · Accepted Answer

To maximize profit, we need to find the quantity where marginal revenue (MR) equals marginal cost (MC).
MR = 50 - Q
MC = 10

50 - Q = 10
Q = 40

So, the profit-maximizing quantity is 40.

Revenue: 
p*q = (50-0.5q)*q = 50q - 0.5q^2 
50*40 - 0.5*40^2 = $800

Total cost:
10*40 = $400

Total profit: 
$800 - $400 = $400

Nick receives 60% of the total profit, which is $240 ($400*0.6).

Therefore, the correct choice is C.