A company manufacturers a product in the United States and sells it in England. The unit cost of manu-facturing is $50. The current exchange rate (dollars per pound) is 1.51. The demand function, which indicateshow many units the company can sell in England as afunction of price (in pounds) is of the power type, withconstant 27556759 and exponent 22.4.a. Develop a model for the company’s profit (indollars) as a function of the price it charges (in pounds). Then use a data table to find the profit-maximizing price to the nearest pound. b. If the exchange rate varies from its current value, doesthe profit-maximizing price increase or decrease?Does the maximum profit increase or decrease?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
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Chapter6: Managing In The Global Economy
Section: Chapter Questions
Problem 7E
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A company manufacturers a product in the United

States and sells it in England. The unit cost of manu-
facturing is $50. The current exchange rate (dollars per

pound) is 1.51. The demand function, which indicates
how many units the company can sell in England as a
function of price (in pounds) is of the power type, with
constant 27556759 and exponent 22.4.
a. Develop a model for the company’s profit (in
dollars) as a function of the price it charges (in

pounds). Then use a data table to find the profit-
maximizing price to the nearest pound.

b. If the exchange rate varies from its current value, does
the profit-maximizing price increase or decrease?
Does the maximum profit increase or decrease?

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