Putting It Together
You should recognize profit as a quadratic equation:P = R − C = −20 + 12q − 0.5q2
We know that the maximum occurs at the vertex. The axis of symmetry is a vertical line that passes through the vertex. The equation for this line is . Thus our price should be set at $12. This will give us a profit of $108. That may not sound like a lot, but if profit, revenue and cost were measured in thousands of dollars, or even millions of dollars, then this is significant.