**Understanding the Market for Cheese and Profit Maximization****Denton Cheese Company (DCC)** makes a unique variety of cheese known as Eagle Cheese. They operate as a monopoly in the market. Additionally, there is a government agricultural support program that will pay DCC **$7.50** per pound for any quantity of cheese that DCC sells to the government.**Market Demand and Cost Structure:**- The market demand for Eagle Cheese is given by the equation: \[ P = 12 - 0.003Q \] Here, $P$ is the price per pound of cheese, and $Q$ is the quantity of cheese.- The cost of making the cheese is represented by the cost function: \[ C = 2Q + 0.002Q^2 \] Where $C$ is the total cost of production, and $Q$ is the quantity of cheese produced.**Objective:**To **maximize profit**, the company needs to determine:1. The quantity of cheese to sell in the market.2. The price they should charge in the market.3. The quantity of cheese to sell to the government.**Detailed Steps (no diagram present):**1. **Calculation of Marginal Revenue and Marginal Cost:** - Determining the marginal revenue (MR) from the demand equation. - Determining the marginal cost (MC) from the cost function.2. **Profit Maximization in the Market:** - Equating MR to MC to find the profit-maximizing quantity in the market. - Using the demand equation to determine the price charged in the market.3. **Selling to the Government:** - Any additional quantity can be sold to the government at $7.50 per pound to further maximize profit.By following these steps, DCC can strategically determine how to allocate their production between the market and the government to ensure maximum profitability.

Profit maximization is the short- or long-run process through which a company determines the…

Denton Cheese Company (DCC) makes a unique variety of cheese they call Eagle Cheese. They sell it as a monopoly, but a government agricultural support program will pay DCC $7.50 per pound for as much cheese as DCC wants to sell to the government. The market demand for Eagle Cheese is the following: P = 12-.003Q The cost of making the cheese is as follows: C = 2Q+.002Q² If the goal is profit maximization, how much cheese should DCC sell to the market and what price should they charge? Also, how much should they sell to the government?

Denton Cheese Company (DCC) makes a unique variety of cheese they call Eagle Cheese. They sell it as a monopoly, but a government agricultural support program will pay DCC $7.50 per pound for as much cheese as DCC wants to sell to the government. The market demand for Eagle Cheese is the following: P = 12-.003Q The cost of making the cheese is as follows: C = 2Q+.002Q² If the goal is profit maximization, how much cheese should DCC sell to the market and what price should they charge? Also, how much should they sell to the government?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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