Swedish Automobiles Are the Best (SAAB) sells two types of vehicles: a truck and a car. The monthly inverse demand or price equation for trucks is estimated as P = 65 -0.05Q (where Qt is the number of trucks sold and Pt is the price per truck in thousands). For cars is: Pe = 55 - 0.1Qc. It costs SAAB $27 (thousand) to produce each additional truck and $21 (thousand) to produce each additional car, so MC₁ = 27 and MC = 21. Assume no fixed cost so TC = MC × Q. X Suppose now that SAAB's production capacity is limited to 400 vehicles per month. Determine the profit-maximizing quantities of trucks (Q) and cars (Qc) and the total profit for each vehicle type with the new optimal quantities caused by the constraint.

Swedish Automobiles Are the Best (SAAB) sells two types of vehicles: a truck and a car. The monthly inverse demand or price equation for trucks is estimated as P = 65 -0.05Q (where Qt is the number of trucks sold and Pt is the price per truck in thousands). For cars is: Pe = 55 - 0.1Qc. It costs SAAB $27 (thousand) to produce each additional truck and $21 (thousand) to produce each additional car, so MC₁ = 27 and MC = 21. Assume no fixed cost so TC = MC × Q. X Suppose now that SAAB's production capacity is limited to 400 vehicles per month. Determine the profit-maximizing quantities of trucks (Q) and cars (Qc) and the total profit for each vehicle type with the new optimal quantities caused by the constraint.

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

Swedish Automobiles Are the Best (SAAB) sells two types of vehicles: a truck and a car. The
monthly inverse demand or price equation for trucks is estimated as P₁ = 65 -0.05Q, (where Q, is
the number of trucks sold and Pt is the price per truck in thousands). For cars is: Pc = 55 -0.1Qc.
It costs SAAB $27 (thousand) to produce each additional truck and $21 (thousand) to produce
each additional car, so MC₁ = 27 and MC = 21. Assume no fixed cost so TC = MC x Q.
Suppose now that SAAB's production capacity is limited to 400 vehicles per month. Determine
the profit-maximizing quantities of trucks (Q) and cars (Qc) and the total profit for each
vehicle type with the new optimal quantities caused by the constraint.

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