Apple Inc

a) If there's one price for all customers. The company must produce Q Apple Watch at P price when Marginal revenue equals marginal cost (MR =MC). MC=200. To obtain MR, it is necessary to derive the inverse demand function, P= 5,000-2Q. Therefore,

MR = 5,000 - 4Q

MR = MC

5,000 - 4Q= 200

-4Q =200-5,000

Q= -4800/-4

Q*= 1,200 This is the optimal quantity of production.

Substitute Q in the inverse demand

P = 5,000-2(1,200) = 2,600

Calculate profit by subtracting the total cost of total revenue.

?= (P * Q) - (AVC * Q) + TFC

Assume no fixed cost

?= (1200) (2600) -(200x1200) =2,120,000-240,400=2,880,000

?= 2,880,000

b)

P1 = 5,000 -2Q1

P2 = 5000 -2Q2

Calculate the revenue for each price

Revenue = P x Q

for price 1: ?' / Q1'= - 4Q1 +Q2= 0

Q2 = 4Q1 (A)

for price 2 =?' / Q2'= -4Q2 + Q1 + 5000

Q1 = -5,000 + 4Q2 (B)

Q1 = -5,000 +4 (4Q1) = -5,000 + 8Q1

Q1 -8Q1 = -5,000

Q1 = -5,000 /-7 =714.28 is the price for block 1

For block 2

Q2 = 4Q1 = 4(714.28) =2857.14 is the price for block 2

Then with this new function we equal to 0

Cost of production

Cost of production is an essential concept from the producer's point of view. As the price of the commodity fixed by the consumer is always based on the actual cost of that product which was invested by the producer at the initial stages. The cost of production includes various concepts such as average cost, total cost, and the marginal cost of the product.