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Theory and ExamplesSuppose that it costs a company y = a +
Chapter 4, Problem 21AAE(choose chapter or problem)
Problem 21AAE
Theory and Examples
Suppose that it costs a company y = a + bx dollars to produce x units per week. It can sell x units per week at a price of P = c - ex dollars per unit. Each of a, b, c, and e represents a positive constant. (a) What production level maximizes the profit? (b) What is the corresponding price? (c) What is the weekly profit at this level of production? (d) At what price should each item be sold to maximize profits if the government imposes a tax of t dollars per item sold? Comment on the difference between this price and the price before the tax.
Questions & Answers
QUESTION:
Problem 21AAE
Theory and Examples
Suppose that it costs a company y = a + bx dollars to produce x units per week. It can sell x units per week at a price of P = c - ex dollars per unit. Each of a, b, c, and e represents a positive constant. (a) What production level maximizes the profit? (b) What is the corresponding price? (c) What is the weekly profit at this level of production? (d) At what price should each item be sold to maximize profits if the government imposes a tax of t dollars per item sold? Comment on the difference between this price and the price before the tax.
ANSWER:
SOLUTION:
Step 1 of 5:
In this question, suppose that it costs a company dollars to produce
units per week. It can sell units per week at a price of dollars per unit. Each of represents a positive constant. (a) Find what production level maximizes the
profit (b) Find the corresponding price (c) Find the weekly profit at this level of production (d) At what price should each item be sold to maximize profits if the government imposes a tax of dollars per item sold. Comment on the difference between this price and the price before the tax.
