Answered

Discover a wealth of knowledge at Westonci.ca, where experts provide answers to your most pressing questions. Explore a wealth of knowledge from professionals across various disciplines on our comprehensive Q&A platform. Join our platform to connect with experts ready to provide precise answers to your questions in different areas.

A company estimates that it can sell 3,000 units each month of its product if it prices each unit at $80. However, its monthly number of sales will increase by 10 units for each $0.10 decrease in price. The company has fixed costs of $250. The cost to make each unit is $4.20. Find the level of production that maximizes the company's profit.

The Should Produce _________
Units at a price of $__________
Which will yield a profit of $_______

Sagot :

sqdancefan

9514 1404 393

Answer:

  • 5290 units
  • $57.10 per unit
  • $279,591 profit

Step-by-step explanation:

For price p, the quantity q of units sold is said to be ...

  q = 3000 +10(80-p)/0.10 . . . . for price in dollars

Then the revenue will be ...

  r(p) = p·q = p(3000 +100(80-p)) = 100p(110 -p)

The cost is said to be ...

  c(q) = 250 +4.20q

  c(p) = 250 +4.20(100(110 -p)) = 250 +420(110 -p)

Then the profit function is ...

  P(p) = r(p) -c(p)

  P(p) = 100p(110 -p) -(250 +420(110 -p)) = (110 -p)(100p -420) -250

__

Ignoring the vertical offset of -250, the quadratic has zeros at 110 and 4.2. So, its line of symmetry (and vertex) will be found at ...

  p = (110 +4.2)/2 = 57.1 . . . . dollars per unit

The quantity that should be produced at that price is ...

  q(57.1) = 100(110 -57.1) = 5290 . . . . units produced

The profit at that price is ...

  P(57.1) = (110 -57.1)(100·57.1 -420) -250 = 52.9(5290) -250

  = $279,591 . . . . best profit

_____

Additional comment

After you have seen a few of these, you can write down the revenue function based on the rate of change of units sold.

If p is the price of a unit, then 80-p is the number of dollars of decrease in price for a price of p. Then (80 -p)/0.10 is the number of 10¢ decreases in price. The increase in units sold is 10 times this, or 10(80 -p)/0.10 = 100(80 -p). When that is added to 3000 units sold, the total is ...

  3000 +100(80 -p) = 3000 +8000 -100p

  = 11000 -100p = 100(110 -p) . . . . . quantity sold at price p

Revenue is the product of price times the number of units sold at that price.

Profit is the difference between revenue and cost.

View image sqdancefan
We appreciate your visit. Our platform is always here to offer accurate and reliable answers. Return anytime. Thank you for visiting. Our goal is to provide the most accurate answers for all your informational needs. Come back soon. Westonci.ca is committed to providing accurate answers. Come back soon for more trustworthy information.