For

Qm =D−(a+b) Pm +b Pe
For D=Demand∧Pe =40 we have :

Qm =( D+ 40 b ) −a Pm

Lets call D+40 b= A , therefore :

A
Q m =A−a Pm → Pm= −Q m /a
a
Lets subtract MC ¿ both sides of the equation

A Qm
Pm −MC= − −MC
a a
Lets multiply by Qm both sides of the equation:
2
A Qm
( Pm −MC )∗Qm = a ∗Qm− a −MC∗Qm

Profits=( P m−MC )∗Q m=π , therefore

2
A Qm
π= ∗Q m − −MC∗Q m (¿)
a a

Since ( ¿ ) i t ' s a quadratic equation , we can define Qm that would maximize profits by derivating

the(¿)∈termsof Qm :

dπ A 2 Qm ( A−a∗MC)
= − −MC=0 →Q m=
d Qm a a 2
Using this value of Qm on ( ¿ ) we have :
2
A ( A−a∗MC ) MC∗( A−a∗MC )
π= ∗( A−a∗MC )− −
2a 4a 2
Rearraging all theterms we have :

2
A2 A∗MC a∗MC 2 ( A−a∗MC)
π= − + =
4a 2 4 4a
Scenario1 : A=140∧MC=20 , a=2 we have :
π=1250 , as calculated before
Scenario2 :relocating productionoverseas∧decreased Marginal cost
( e . g , A=120∧MC=10 , a=2 ) :
π=1250 , same as above
Therefore we can not say for sure if profits will increase or decrease, we need more information about
the new MC and the new demand.