Damsung Company assembles television sets. The demand curve for its TV sets is given by P = 3,000 - 10Q, where Q is the number of TV sets sold and P is the price. The cost for assembly (which includes purchasing all parts) is equal to 500 x Q, so that the marginal cost of assembly is constant at $500. The distribution costs are equal to 50 x Q, so that the marginal cost of distribution is constant at $50. Damsung Company has no costs other than the costs for assembly and distribution.
a. Identify/describe Damsung Company's problem.
b. Solve Damsung Company's problem: what is the firm's profit maximizing retail price and quantity? What are the firm's profits?