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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.

Math   Calculus   
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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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