Happy Planet drinks price change as the quantity sold changes. In particular p=10-0.005x. The total...

Question

Happy Planet drinks price change as the quantity sold changes. In particular p=10-0.005x. The total cost to produce the drinks are $2.50 per drink. Their production factory costs $1000 per month.What is the profit maximizing level of output?

Robert · Accepted Answer

SOLUTION:
Total Cost (TC) = $1,000 + $2.50X
Marginal cost (MC) = dTC/dx = 2.5
Demand: p = 10 - 0.005x
Total revenue (TR) = p*x = 10x-0.005x^2
Marginal revenue (MR) = dTR/dx = 10 – 0.01x
At the profit maximization, MR = MC i.e.
2.5 = 10 – 0.

Happy Planet drinks price change as the quantity sold changes. In particular p=10-0.005x. The total cost to produce the drinks are $2.50 per drink. Their production factory costs $1000 per month. What...

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