
(a)
The equation for Total cost and total revenue.

Explanation of Solution
Given information:
P = -0.25D + 250
P = unit sales price
D = annual quantity demanded for the product.
Total Cost (TC) = Fixed Cost+ Variable cost
Total Revenue (TR) − Quantity demanded X Price
Total Profit = Total Revenue − Total Costs
The cost and revenue details of the company are given below:
The variable costs per unit are $20.00 and the fixed costs are $10.875.00
The price-demand relationship is P = -0.25D+250 .......(1)
Here,
P = unit sales price
D = annual quantity demanded for the product.
The following three formulas were also provided to assist you with the problem as wll.
Total Cost (TC) = Fixed Cost+ Variable cost
Total Revenue (TR) − Quantity demanded× Price
Total Profit = Total Revenue − Total Costs
To determine the total cost of the problem, it should be noted that TC is equal to the combination of both fixed costs and variable costs.
Total Costs (TC) - $10,875.00+20.00D
Where, D is the quantity demanded or sold.
Total Revenue can be calculated by the multiplying price with quantity
Total Revenue = Price × Quantity Demanded
=(-0.25D+250)×D
= -0.25D2 + 250D
Total Revenue = -0.25D2 + 250D.
(b)
Breakeven quantity.

Explanation of Solution
Breakeven point for units is that one would need to produce inorder to achieve no profit or loss. In this case, set the formula,
Total Cost = Total Revenue
$10,875+20.00D = -0.25D2 +250D
0.25D2 -250D+20.00D+$10,875.00=0
0.25D2 -230D+$10,875.00=0
The standard formula that assists in getting the correct answer.
Thus, the break even points for this situation are both 50 units and 870 units respectively. It can be said that anything above 870 units and below 50 units could constitute a loss whereas anything between would be profitable to profitable.
(c)
Number of units the company would want to produce if they wanted to maximize the revenues.

Explanation of Solution
Total Revenue = -0.25D2 +250D
Revenue maximization:
Revenue is maximized when MR equals to zero.
Revenue maximization;
Thus to maximize revenue, the company must produce 500 units.
(d)
Total Profit at revenue maximization point of 500 units:

Explanation of Solution
Total Profit = Total Revenue- Total Costs
Thus, the total profit at revenue maximization point of 500 units is $41,625.
The company’s maximum profit is obtained when marginal revenue equals to marginal cost.
Marginal Cost (MC) is calculated as shown below:
Profit maximization is at MR = MC
Thus, maximum profit is obtained at 460 units.
Total Profit = Total Revenue − Total Costs
Maximum possible profit is $42,025.
(e)
Graphical Representation:

Explanation of Solution
Graphical Representation:
Want to see more full solutions like this?
Chapter 2 Solutions
ENGINEERING ECO ANALYSIS W/STUDY GUIDE
- On the 1st of April 2018, the South African National Treasury increase the value-added tax rate from 14% to 15%. This policy change had a wide-ranging impact on society. Discuss some of the benefits and drawbacks of making use of this type of tax to generate government revenue and what we may expect in terms of its impact on inflation and GDP growth within the economy.arrow_forward5. We learnt the following equation in the class: Ak = sy - (n + 8)k where y = ko. Now, I transform this equation into: Ak/k = sy/k - (n + 8). I want you to use a diagram to show the steady state solution of this equation (In the diagram, there will be two curves - one represents sy/k and one represents (n + 8). In the steady state, of course, Ak/k = 0). In this diagram, the x-axis is k. What will happen to this diagram if the value of n increases?arrow_forwardNot use ai pleasearrow_forward
- 3. A country has the following production function: Y = K0.2L0.6p0.2 where Y is total output, K is capital stock, L is population size and P is land size. The depreciation rate (8) is 0.05. The population growth rate (n) is 0. We define: y = ½, k = 1 and p = . Land size is fixed. L a) Find out the steady state values of k and y in terms of p, the per capita land size.arrow_forwardNot use ai please letarrow_forwardConsider the market for sweaters in a Hamilton neighbourhood shown in the figure to the right. The consumer surplus generated by consuming the 29th sweater is OA. $67.90. OB. $58.20. ○ C. $77.60. OD. $38.80. ○ E. $19.50. Price ($) 97 68.0 48.5 29.0 29.0 Sweater Market 48.5 Quantity (Sweaters per week)arrow_forward
- Not use ai pleasearrow_forwardIn the following table, complete the third column by determining the quantity sold in each country at a price of $18 per toy train. Next, complete the fourth column by calculating the total profit and the profit from each country under a single price. Price Single Price Quantity Sold Price Discrimination Country (Dollars per toy train) (Millions of toy trains) Profit (Millions of dollars) Price (Dollars per toy train) Quantity Sold (Millions of toy trains) Profit (Millions of dollars) France 18 Russia 18 Total N/A N/A N/A N/A Suppose that as a profit-maximizing firm, Le Jouet decides to price discriminate by charging a different price in each market, while its marginal cost of production remains $8 per toy. Complete the last three columns in the previous table by determining the profit-maximizing price, the quantity sold at that price, the profit in each country, and total profit if Le Jouet price discriminates. Le Jouet charges a lower price in the market with a relatively elastic…arrow_forwardNot use ai pleasearrow_forward
- Not dhdjdjdjduudnxnxjfjfi feverarrow_forwardDiscuss the different types of resources (natural, human, capital) and how they are allocated in an economy. Identify which resources are scarce and which are abundant, and explain the implications of this scarcity or abundance.arrow_forwardNot use ai pleasearrow_forward
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education





