What is the profit function?

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
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What is the profit function?
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
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
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