2. A company produces and sells a consumer product and is able to control the demand for the product by varying the selling price. The approximate relationship between price and demand is 2,700 5,000 p = $38 + D D2 for D > 1 where p is the price per unit in dollars and D is the demand per month. The company is seeking to maximize its profit. The fixed cost is $1,000 per month and the variable cost (c,) is $40 per unit. a. What is the number of units that should be produced and sold each month to maximize profit? b. Show that your answer to Part (a) maximizes profit.

2. A company produces and sells a consumer product and is able to control the demand for the product by varying the selling price. The approximate relationship between price and demand is 2,700 5,000 p = $38 + D D2 for D > 1 where p is the price per unit in dollars and D is the demand per month. The company is seeking to maximize its profit. The fixed cost is $1,000 per month and the variable cost (c,) is $40 per unit. a. What is the number of units that should be produced and sold each month to maximize profit? b. Show that your answer to Part (a) maximizes profit.

Microeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506893

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter11: Price-searcher Markets With High Entry Barriers

Section: Chapter Questions

Problem 14CQ

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