A company produces and sells a consumer product and thus far has been able to control the volume of the product by varying the selling price. The company is seeking to maximize its net profit. It has been concluded that the relationship between price and demand, per month, is approximately D = 500 - 5p, where p is the price per unit in dollars. The fixed cost is $1,000 per month, and the variable cost is $20 per unit. Obtain the answer mathematically to the following questions: a.What is the optimal number of units that should be produced and sold per month? b. What is the maximum profit per month? c.What are the breakeven sales quantities and the range of profitable demand volume?
A company produces and sells a consumer product and thus far has been able to control the volume of the product by varying the selling price. The company is seeking to maximize its net profit. It has been concluded that the relationship between price and demand, per month, is approximately D = 500 - 5p, where p is the price per unit in dollars. The fixed cost is $1,000 per month, and the variable cost is $20 per unit. Obtain the answer mathematically to the following questions: a.What is the optimal number of units that should be produced and sold per month? b. What is the maximum profit per month? c.What are the breakeven sales quantities and the range of profitable demand volume?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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A company produces and sells a consumer product and thus far
has been able to control the volume of the product by varying
the selling price . The company is seeking to maximize its net
profit. It has been concluded that the relationship between price
and demand, per month, is approximately D = 500 - 5p, where p
is the price per unit in dollars. The fixed cost is $1,000 per
month, and the variable cost is $20 per unit. Obtain the answer
mathematically to the following questions:
a.What is the optimal number of units that should be produced and sold per month?
b. What is the maximum profit per month?
c.What are the breakeven sales quantities and the range of profitable demand volume?
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