Question
An office supply company manufactures and sells X permanent markers per year at a price of...
An office supply company manufactures and sells X permanent markers per year at a price of P €/unit. The Price/Demand equation for the markers is: P= 7 − 0.002X
The total cost of manufacturing is: C(X) = 1000 + 2X
PROFIT FUNCTION = 5X -1000 - 0.002X2
PROFIT MAXIMIZATION = 1250 MARKERS , PRICE= 4.5
QUESTION: Draw a graph representing the above-mentioned situation.
Homework Answers
Answer #1
Solution :
The given information is
The Price/Demand equation for the markers is: 
The total cost of manufacturing is: 
Profit function = 
Profit maximization = 1250 Markers , Price= 4.5
When Marginnal cost = Marginal revenue then profit maximization stated
So,
Marginal cost is 
The Revenue is 
Marginal revenue is 
When Marginnal cost = Marginal revenue equilibrium is attained.
The point is (1250,2).
The point at demand curve corresponding to the point where MC=MR is equilibrium point.
It is shown in the diagram below.
The shaded area is the profit.
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