Need help from you math gurus

[ChaoZ]

Problem:
Total Cost = 120+2Q+.05Q^2
Annual demand is P = 10-0.05Q

Calculate the revenue maximizing of the quantity level (Q) and the price level (P).


I read the chapter on this and still don't know wtf to do. I don't even understand the questions.

 

[dbk]

plug in q and solve for p then plug in p and solve for q?

 

[potoba]

define revenue maximizing, pls...

 

[ChaoZ]

Originally posted by: dbk
plug in q and solve for p then plug in p and solve for q?

That's not right since Q != total cost

 

[chuckywang]

Take derivative, set equal to zero....What's the equation for revenue?

 

[ChaoZ]

Originally posted by: potoba
define revenue maximizing, pls...

I don't know. That's all it literally saids.

 

[bsobel]

Originally posted by: ChaoZ
Problem:
Total Cost = 120+2Q+.05Q^2
Annual demand is P = 10-0.05Q

Calculate the revenue maximizing of the quantity level (Q) and the price level (P).


I read the chapter on this and still don't know wtf to do. I don't even understand the questions.

Maybe this will get you started. Imagine a graph with quantity as the left to right axis and cost as the up/down axis.

If you were to take the total cost of making the item and put it on a graph from lowest cost to highest cost you're gonna have a line going up from the bottom left to the top right.

If you take the annual demand for the product and graph, that line is going to go from the top left to the bottom right.

The point where the lines cross should be optimal quantity to build (and not have surplus) while meeting demmand at the highest cost (profit)

 

[ChaoZ]

^ So basically set the two equations equal to each other to find Q?

 

[potoba]

Originally posted by: bsobel

Originally posted by: ChaoZ
Problem:
Total Cost = 120+2Q+.05Q^2
Annual demand is P = 10-0.05Q

Calculate the revenue maximizing of the quantity level (Q) and the price level (P).


I read the chapter on this and still don't know wtf to do. I don't even understand the questions.

Maybe this will get you started. Imagine a graph with quantity as the left to right axis and cost as the up/down axis.

If you were to take the total cost of making the item and put it on a graph from lowest cost to highest cost you're gonna have a line going up from the bottom left to the top right.

If you take the annual demand for the product and graph, that line is going to go from the top left to the bottom right.

The point where the lines cross should be optimal quantity to build (and not have surplus) while meeting demmand at the highest cost (profit)

the total cost curve is not linear as it is second ordered in terms of Q. And no, if you set total cost= P then solve for Q, you'll have negative solutions.

 

[ChaoZ]

I got it, don't know if it's right though; oh wells. Oh, and I'm supposed to get a negative value. It's some inverse method where the negative value is the point of maximum profit.

 

[potoba]

Originally posted by: ChaoZ
I got it, don't know if it's right though; oh wells. Oh, and I'm supposed to get a negative value. It's some inverse method where the negative value is the point of maximum profit.

lol, i dont do econ, but is it ok to have a negative quantity? Or do we convert it to some positive value? Just out of my curiosity...