Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
What is the profit function?
Transcribed Image Text:A manufacturer of wool roving has determined that the highest price per unit that can
be charged to sell q ounces of wool roving is
D(q) = p = 50 – 0.25q
It costs
C(q) = 100 + 5q?
to manufacture q ounces of wool roving. The manufacturer can produce between 0 and 4,000 ounces
of roving.
What is the profit function for this manufacturer?
How many ounces of wool roving must be produced and sold to yield the maximum profit?
How do you know that this is a global maximum?
1
Expert Solution
Step 1
Profit refers to excess of revenue over cost. Profit function shows mathematical relationship between profit and quantity of product. It can derived as:
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