Assume a startup health care company faces the following weekly demand and short-run cost...

Question:

Assume a startup health care company faces the following weekly demand and short-run cost functions:

VC = 20Q + 0.015Q{eq}^2 {/eq} with MC = 20 + 0.03Q and FC = $12,000

P = 75 - 0.04Q and MR = 75 - 0.08Q

  • Where price is in $ and Q is the number of patients per week. All answers should be rounded to the nearest whole number.

Algebraically, determine what price the company should charge in order for the company to maximize profit in the short run.

Determine the quantity that would be produced at this price and the maximum profit possible.

Profit-Maximization:

It is the equilibrium market condition that determines producers make the maximum possible profit with the given cost structure. It is expressed as the condition of equality between marginal revenue and marginal cost for imperfect competition and equality between price and marginal cost in perfect competition.

Answer and Explanation: 1

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The marginal cost of production is expressed as follows:-

{eq}MC = 20 + 0.03Q {/eq}

The marginal revenue of production is expressed as follows:-

{...

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Profit Maximization: Definition, Equation & Theory

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Chapter 24 / Lesson 6
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Learn the profit maximization definition, its importance, and explore the profit maximization theory. See how to calculate profit maximization with examples.


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