Peter Morgan sells pigeon pies from his pushcart in Central Park.Due to the abundant supplies of raw materials, his costs are zero.The demand schedule for his pigeon pies is p(y)= 150 - y/3.What level of output will maximize Peter's profits?
A)225
B)45
C)450
D)675
E)None of the above

Question

Quizplus · Accepted Answer

Peter's profit is given by:$$\pi = p(y)y - 0 = (150 - y/3)y = 150y - y^2/3$$To maximize profit, we take the derivative of profit with respect to output and set it equal to zero:$$\frac{d\pi}{dy} = 150 - 2y/3 = 0$$Solving for y, we get:$$y = 225$$Therefore, Peter should produce 225 pigeon pies to maximize his profits.

Peter Morgan Sells Pigeon Pies from His Pushcart in Central