Chapter 1, Problem 1P

Break-Even Analysis

We discussed linear demand curves in Section 1.3. Demand curves normally apply to an entire industry or to a monopolist—-that is, a manufacturer so large that the quantity that it supplies affects the market price of the commodity. We discussed linear cost curves in Section 1.2. In this chapter project, we combine demand curves and cost curves with least-squares lines to determine break-even points.

Table 1 can be used to obtain the demand curve for a monopolist who manufactures and sells a unique type of camera. The first column gives several production quantities in thousands of cameras, and the second column gives the corresponding prices per camera. For instance, in order to sell 200 thousand cameras, the manufacturer must set the price at $316 per camera. Find the least-squares line that best fits these data; that is, find a demand curve for the camera.

Table 1

q(thousands)	p(dollars)
100	360
200	316
300	288
400	236
500	200