A company manufacturers a product in the United States and sells it in England. The unit cost of manufacturing is $50. The current exchange rate (dollars per pound) is 1.221. The demand function, which indicates how many units the company can sell in England as a function of price (in pounds) is of the power type, with constant 27556759 and exponent −2.4. a. Develop a model for the company’s profit (in dollars) as a function of the price it charges (in pounds). Then use a data table to find the profit-maximizing price to the nearest pound. b. If the exchange rate varies from its current value, does the profit-maximizing price increase or decrease? Does the maximum profit increase or decrease?

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Practical Management Science

6th Edition
WINSTON + 1 other
Publisher: Cengage,
ISBN: 9781337406659
BuyFind

Practical Management Science

6th Edition
WINSTON + 1 other
Publisher: Cengage,
ISBN: 9781337406659

Solutions

Chapter
Section
Chapter 2, Problem 30P
Textbook Problem

A company manufacturers a product in the United States and sells it in England. The unit cost of manufacturing is $50. The current exchange rate (dollars per pound) is 1.221. The demand function, which indicates how many units the company can sell in England as a function of price (in pounds) is of the power type, with constant 27556759 and exponent −2.4.

  1. a. Develop a model for the company’s profit (in dollars) as a function of the price it charges (in pounds). Then use a data table to find the profit-maximizing price to the nearest pound.
  2. b. If the exchange rate varies from its current value, does the profit-maximizing price increase or decrease? Does the maximum profit increase or decrease?

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Chapter 2 Solutions

Practical Management Science
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