4. Swedish Automobiles Are the Best (SAAB) sells two types of vehicles: a truck and a car. The monthly inverse demand or price equation for trucks is estimated as P₁= 65. 0.05Q (where Qt is the number of trucks sold and Pt is the price per truck in thousands). For cars is: Pe=55-0.1Qc. It costs SAAB $27 (thousand) to produce each additional truck and $21 (thousand) to produce each additional car, so MCt = 27 and MC, = 21. Assume no fixed cost so TC = MCX Q. Suppose now that SAAB's production capacity is limited to 400 vehicles per month. Determine the profit-maximizing quantities of trucks (Q) and cars (Qc) and the total profit for each vehicle type with the new optimal quantities caused by the constraint.

4. Swedish Automobiles Are the Best (SAAB) sells two types of vehicles: a truck and a car. The monthly inverse demand or price equation for trucks is estimated as P₁= 65. 0.05Q (where Qt is the number of trucks sold and Pt is the price per truck in thousands). For cars is: Pe=55-0.1Qc. It costs SAAB $27 (thousand) to produce each additional truck and $21 (thousand) to produce each additional car, so MCt = 27 and MC, = 21. Assume no fixed cost so TC = MCX Q. Suppose now that SAAB's production capacity is limited to 400 vehicles per month. Determine the profit-maximizing quantities of trucks (Q) and cars (Qc) and the total profit for each vehicle type with the new optimal quantities caused by the constraint.

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter5: Elasticity Of Demand And Supply

Section: Chapter Questions

Problem 1.1P: (Calculating Price Elasticity of Demand) Suppose that 50 units of a good are demanded at a price of...

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Question

●
4. Swedish Automobiles Are the Best (SAAB) sells two types of vehicles: a truck and a
car. The monthly inverse demand or price equation for trucks is estimated as P₁ = 65-
0.05Q (where Qt is the number of trucks sold and Pt is the price per truck in thousands).
For cars is: Pe= 55-0.1Qc. It costs SAAB $27 (thousand) to produce each additional
truck and $21 (thousand) to produce each additional car, so MCt = 27 and MCe = 21.
Assume no fixed cost so TC = MCX Q.
Suppose now that SAAB's production capacity is limited to 400 vehicles per month.
Determine the profit-maximizing quantities of trucks (Qt) and cars (Qc) and the total
profit for each vehicle type with the new optimal quantities caused by the constraint.

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