A firms demand function is given as P=32-6Q and the average cost function as

AC=Q2 7.5Q+50+2/Q. Calculate the level of output Q which:- a) maximizes total

revenue b) maximizes profits
Given,
Demand Function : P = 32-6Q
Average Cost function : AC = Q2 7.5Q+50+2/Q
we have,
Total Cost function : TC = AC Q
= (Q2 7.5Q+50+2/Q) Q = Q3 - 7.5Q2 +50Q + 2
Total Revenue : TR = PQ
= (32 - 6Q)Q = 32Q - 6Q2
Profit () = TR - TC
= 32Q - 6Q2 - (Q3 - 7.5Q2 +50Q + 2)
= - Q3 + 1.5Q2 -18Q-2
For Revenue Maximization
First order condition ( Necessary Condition)
MR= 0

d ( TR )
=0
dQ

d ( 32 Q6 Q 2 )
=0
dQ

or, 32- 12Q = 0

Therefore, Q = 32/12

Second order condition ( Sufficient Condition)

d 2 TR
<0
dQ 2

d ( 3212 Q )
or, <0
dQ
or -12 < 0.
The revenue is maximu at Q= 32/12 becuase second order condition is fulfilled.