An entrepreneur plans to convert a building she owns into a video-game arcade. Her main decision is how many games to purchase for the arcade. From survey information, she projects total revenue per year as R = 10,000Q - 200Q2, where Q is the number of games. The cost for each game (leasing, electricity, maintenance, and so on) is $4,000 per year. The entrepreneur will run the arcade, but instead of paying herself a salary, she will collect profits. She has received offers of $100,000 to sell her building and a $20,000 offer to manage a rival’s arcade. She recognizes that a normal return on a risky investment such as the arcade is 20 percent.
a. As a profit maximizer, how many games should she order?
b. What is her economic profit?