A price-setting firm faces the following estimated demand and average variable cost functions:Qd = 800,000 - 2,000P + 0.7M + 4,000PRAVC = 500 - 0.03Q + 0.000001Q2where Qd is the quantity demanded, P is price, M is income, and PR is the price of a related good. The firm expects income to be $40,000 and PR to be $53. Total fixed cost is $2,600,000. What price should the firm charge in order to maximize profit?
A. $510
B. $420
C. $445
D. $400
E. $356
Answer: A
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