A firm faces a demand curve given by the equation P = 80 – 2Q. Its marginal cost of production is $20 per unit.

a. Find the profit-maximizing price and quantity.

b. Suppose that the firm contemplates issuing a $10-off coupon. Assume that consumers who would purchase at a price $50 or more never redeem coupons. Consumers who do not purchase at $50 or more always redeem coupons. By how much would the firm’s profits change if it issues this kind of coupon?

Answer rating: 100% (QA)

a To find the profitmaximizing price and quantity we need to determine the quantity at which margina... View the full answer