Profit Maximisation

I think you must be using an old edition of the Revision Kit, because Q102 in the current edition is not asking about profit maximisation. It is asking about elasticity and is not requiring any calculations.

In the price demand equation: b = (145 - 120) / (11,250 - 5,000) = 0.004 a = 145 + (5,000 x 0.004) = 165 Therefore P = 165 - 0.004Q Therefore MR = 165 - 0.008Q For maximum profit, MR = MC so 165 - 0.008Q = 27 0.008Q = 138 Q = 138 / 0.008 = 17,250 Using this in the price demand equation gives: P = 165 - (0.004 x 17,250) = $96 Have you watched my free lectures on this? The lectures are a complete free course for Paper PM and cover everything needed to be able to pass the exam well.

You are welcome :-)