Answer
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Explanation
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Answer:
Profit-maximizing price per drug treatment is $2,000
Explanation:
The "cost of production" (cost of providing all treatments) is given by the area under the cost curve
(The cost curve is the straight line C = 10Q)
It is a right triangle with one side being the quantity (Q) and the other being the cost of the last unit being produced (10Q)
So the cost of production is:
Revenue is given by P * Q = (3,000 - 10Q) * Q
Profit = Revenue - Cost of production = 3,000Q - -
To find maximum, take derivative and solve for:
3,000 - 30Q = 0 => Q = 100
Profit-maximizing quantity is 100. The price will then be P = 3,000 - 10*100 = $2,000