Andy Mendoza makes handcrafted dolls, which he sells at craft fairs. He is considering mass-producing the dolls to sell in stores. He estimates that the initial investment for plant and equipment will be $15,000, while labor, materials, packaging, and shipping will be about $4 per doll. He has determined that monthly sales volume is related to price, according to the following equation: v = 1000 - 20p + (1000/p) Find the optimal price, the optimal volume, and the

Andy Mendoza makes handcrafted dolls, which he sells at craft fairs. He is considering mass-producing the dolls to sell in stores. He estimates that the initial investment for plant and equipment will be $15,000, while labor, materials, packaging, and shipping will be about $4 per doll. He has determined that monthly sales volume is related to price, according to the following equation: v = 1000 - 20p + (1000/p) Find the optimal price, the optimal volume, and the

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Andy Mendoza makes handcrafted dolls, which
he sells at craft fairs. He is considering
mass-producing the dolls to sell in stores. He estimates that
the initial investment for plant and
equipment will be $15,000, while labor, materials,
packaging, and shipping will be about $4 per
doll. He has determined that monthly sales volume is
related to price, according to the following
equation:
v = 1000 - 20p + (1000/p)
Find the optimal price, the optimal volume, and the
maximal profit per month with a relationship between
volume and price.

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