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Profit Maximization

  1. Dec 11, 2007 #1
    1. The problem statement, all variables and given/known data


    Find the level of production x that will maximize profit.



    2. Relevant equations


    C(x) = 500 + 100x^2 + x^3, where x = units produced.

    R(x) = 7000x - 80x^2


    3. The attempt at a solution


    Should I use marginal cost and marginal revenue, or is there a way to just use the equations directly to find the profit maximization?
     
  2. jcsd
  3. Dec 11, 2007 #2

    EnumaElish

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    Profit = R - C. x* maximizes Profit if Profit'(x*) = 0 and Profit"(x*) < 0.

    If you think about it it should be clear that MR = MC amounts to the same first order condition as above.
     
    Last edited: Dec 11, 2007
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