Consider the following situation:
the demand for the new zphone is given by q = 6,000 – 6 p where q is the demand per day and p is the per-unit price. note that this can be re-written as p = 1,000 – q / 6. the cost to produce this new zphone is $600 per unit. assume that micrap produces everything in-house and sells the zphones in their own micrap stores. determine the daily profits from sales of this new zphone. hint: first plot the demand curve p = 1,000 – q / 6. it will be a straight line with a y-axis intercept at p = 1,000 and an x-axis intercept at q = 6,000. next, note that when the demand curve is linear, it is optimal for a firm to price half-way between its cost and the y-axis intercept (this can be proven using calculus, but you are not asked to do so). this means the price will be $800 and the quantity sold will be 1,200.