A manufacturers cost of producing a product is given in Figure 4.111. The manufacturer
Chapter 4, Problem 51(choose chapter or problem)
A manufacturers cost of producing a product is given in Figure 4.111. The manufacturer can sell the product for a price p each (regardless of the quantity sold), so that the total revenue from selling a quantity q is R(q) = pq. (a) The difference (q) = R(q) C(q) is the total profit. For which quantity q0 is the profit a maximum? Mark your answer on a sketch of the graph. (b) What is the relationship between p and C(q0)? Explain your result both graphically and analytically. What does this mean in terms of economics? (Note that p is the slope of the line R(q) = pq. Note also that (q) has a maximum at q = q0, so (q0) = 0.) (c) Graph C(q) and p (as a horizontal line) on the same axes. Mark q0 on the q-axis. q R(q) C(q) $ Figure 4.111
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