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16 November, 20:26

Currently, the demand equation for baseball bats is Q = 100 - 2P. The current price is $15 per bat. Is this the best price to charge in order to maximize revenues?

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  1. 16 November, 21:36
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    The company maximize their profit when the marginal revenue = cost = selling price.

    In this case we know that at the given price the margin revenue is 40 which do not equal the price of 15

    The company should increase the price.

    Explanation:

    Q = 100 - 2P

    Total revenue = P x Q

    total revenue = P x (100 - 2P)

    total revenue = - 2P^2+100P

    from the total revenue we calculate the dTR/dP which is the marginal revenue:

    marginal revenue = - 4P + 100 = 100 - 4P

    if P = 15

    100 - 4 x 15 = 100 - 60 = 40

    The price of 15 is below the marginal revenue.

    The firm maximize their profit when the price equals the marginal revenue.

    The baseball bat is not in the best price.
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