Write an equation for the function.

Question

$7 sign-up fee, plus $2 for every movie downloaded

Answer 1

C(x) = 7 + 2x where x = number of movies downloaded

$7 is fixed cost, $2x is variable cost, C(x) = total cost

marginal cost = MC = derivative of C(x) = C'(x) = $2

set MC = MR = marginal revenue and you have the profit maximizing output level

Revenue = price x quantity = Px. Marginal revenue = P = price

profit maximizing output is when MC = MR = price = $2. MC is always = $2. Price varies with output

in a linear equation it's P=a -bx where a=the price where consumers stop buying anything. Regardless of

linearity, the demand function is downward sloping, with a negative slope, such as -b.