Answer:
Explanation:
Base on the scenario been described in the question
First strategy (per-unit price strategy):
According to the given information the demand function is given as:
Economics homework question answer, step 1, image 1
So, the price function can be rewrite as:
Economics homework question answer, step 1, image 2
The firm maximizes the profit at where the marginal revenue (MR) is equal to marginal cost (MC). The MR can be calculated as follows:
Economics homework question answer, step 2, image 1
Since MC is given as 1000, the profit maximization level of quantity can be calculated as follows:
Economics homework question answer, step 3, image 1
Thus, the quantity is 50.
In order to calculate the profit maximizing level of price, substitute the value of Q in price function as follows:
Economics homework question answer, step 3, image 2
Thus, the price is $1250.
