A large company has determined the relationship between the price (p) of their product and the demand (D) as p = 450 - 0.03D. The fixed cost per year is $500,000 and the variable cost per unit is $101.50. a. Determine the optimal demand (D) to maximize profit? b. How much is the maximum profit? c. What are the break-even points in terms of number of units? d. What are the revenues and total costs at these break even-points?

A large company has determined the relationship between the price (p) of their product and the demand (D) as p = 450 - 0.03D. The fixed cost per year is $500,000 and the variable cost per unit is $101.50. a. Determine the optimal demand (D) to maximize profit? b. How much is the maximum profit? c. What are the break-even points in terms of number of units? d. What are the revenues and total costs at these break even-points?

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter7: Economies Of Scale And Scope

Section: Chapter Questions

Problem 5MC

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