Bavarian Crystal Works designs and produces crystal wine decanters for export to international markets.  The marketing manager of Bavarian Crystal Works estimates the demand curve for each month to be:   P=1,000-0.0025Q Where Q is the number of wine decanters produced monthly.  Bavarian Crystal Works also pays a lease for its factory and equipment every month in the amount of $1,000,000.  Finally, the cost to produce each wine decanter is $200.   What quantity would maximize profits? What is the optimal price for Bavarian Crystals to charge?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter11: Price And Output Determination: Monopoly And Dominant Firms
Section: Chapter Questions
Problem 6E
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Bavarian Crystal Works designs and produces crystal wine decanters for export to international markets.  The marketing manager of Bavarian Crystal Works estimates the demand curve for each month to be:

 

P=1,000-0.0025Q

Where Q is the number of wine decanters produced monthly. 

Bavarian Crystal Works also pays a lease for its factory and equipment every month in the amount of $1,000,000.  Finally, the cost to produce each wine decanter is $200.  

What quantity would maximize profits? What is the optimal price for Bavarian Crystals to charge?

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