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Suppose the microchip producer discussed in this chapter faces demand and cost equations given by Q = 8.5 - .05P and C = 100 + 38Q. Choosing to treat price as its main decision variable, it writes profit as
1r = R - C
= [P(8.5 - .05P)] - [100 + (38)(8.5 - .05P)]
= -423 + 10.4P - .05P 2 .
Derive an expression for M1r = d1r/dP. Then set M1r = 0 to find the firm’s optimal price. Your result should confirm the optimal price found earlier in the chapter.
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