CMA Final · Strategic Cost Management · Business Application of Maxima and Minima
A firm sells a product with demand q = 500 - 2p and average cost per unit of Rs 50 (constant). Profit is maximised at what quantity q?
Profit is maximised at 200 units, where marginal revenue 250 - q equals the constant marginal cost of Rs 50.
- A100
- B150Correct
- C200
- D250
Explanation
p = 250 - q/2, so R = 250q - q^2/2 and MR = 250 - q. MC = 50, so q = 200? Setting 250 - q = 50 gives q = 200.
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