On weekends during summer months, Eric Cartman rents jet skis at the beach on an hourly basis. Last week, Cartman rented jet skis for 20 hours per day at a rate of $50 per hour. This week, rentals fell to 15 hours per day when Cartman raised the price to $55 per hour.
Using these two price-output combinations, the relevant linear demand and marginal revenue curves can be estimated as
P = $70 - $10 and MR = $70 - $2Q
Calculate the revenue-maximizing price-output combination. How much are these maximum revenues? If marginal cost is $30 per hour, calculate prifits at this activity level, assuming TC = MC * Q.Calculate the profit-maximizing price-output combination along with revenues and profits at this activity level.