The daily demand function for x LED lights sold by a major retailer is p = 715 - 0.75x dollars, and the average cost of sales is C = 220 + 2x dollars. Find the quantity that will maximum profit, the selling price at that quantity and the maximum profit.

The daily demand function for x LED lights sold by a major retailer is p = 715 - 0.75x dollars, and the average cost of sales is C = 220 + 2x dollars. Find the quantity that will maximum profit, the selling price at that quantity and the maximum profit.

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter12: More Realistic And Complex Pricing

Section: Chapter Questions

Problem 12.1IP

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Question

The daily demand function for x LED
lights sold by a major retailer is p
= 715 0.75x dollars, and the
average cost of sales is C
= 220 +2x dollars. Find the
quantity that will maximum profit, the
selling price at that quantity and the
maximum profit.

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Step 1: State the given information:

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Step 2: Determine marginal revenue and marginal cost function:

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Step 3: Determine profit maximizing output x:

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Step 4: Determine price crossponding to profit maximizing quantity and then profit:

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