2. 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 2,700 5,000 p = $38 + D D2 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 (c,) 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) maximizes profit.

2. 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 2,700 5,000 p = $38 + D D2 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 (c,) 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) maximizes profit.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Cost of Production

The entire idea of the cost of production or production cost is applied corresponding, or we can say that it is related to monetary cost. Money cost refers to any money expenditure which the firm or supplier, or producer undertakes in purchasing or hiring factor of production or factor services.

Question

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2. 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
2,700 5,000
p = $38 +
D
for D >1
D2
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 (c,) 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) maximizes profit.

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