1. A company produces and sells a consumer product and is able to control the demand for the product by varying the selling price. The approximate relationship between price and demand is p = $38 + 2,700/D - 5,000/D^2, for D >1, where p is the price per unit in dollars and D is the demand per month. The company is seeking to maximize its profit. The fixed cost is $1,000 per month and the variable cost (cv) is $40 per unit. a. What is the number of units that should be produced and sold each month to maximize profit? b. Show that your answer to Part (a) maximize profit.
1. A company produces and sells a consumer product and is able to control the demand for the product by varying the selling price. The approximate relationship between price and demand is p = $38 + 2,700/D - 5,000/D^2, for D >1, where p is the price per unit in dollars and D is the demand per month. The company is seeking to maximize its profit. The fixed cost is $1,000 per month and the variable cost (cv) is $40 per unit. a. What is the number of units that should be produced and sold each month to maximize profit? b. Show that your answer to Part (a) maximize profit.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:1. A company produces and sells a consumer
product and is able to control the demand for the
product by varying the selling price. The
approximate relationship between price and
demand is
p = $38 + 2,700/D - 5,000/D^2, for D >1,
where p is the price per unit in dollars and D is the
demand per month. The company is seeking to
maximize its profit. The fixed cost is $1,000 per
month and the variable cost (cv) is $40 per unit.
a. What is the number of units that should be
produced and sold each month to maximize
profit?
b. Show that your answer to Part (a) maximize
profit.
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