I see lots of answers to this question, but not specifically how to get to the n
ID: 1106902 • Letter: I
Question
I see lots of answers to this question, but not specifically how to get to the numbers and I am totally lost! so please dont just copy and paste an answer that is already in Chegg. Question-Minden company Linden company introduced a new product last year for which it is trying to find an Optimum selling price Market studies suggest that company can increase sales by 5000 units for each $2 reduction in selling price the company's present selling price is $70 per unit and variable expenses are $40 per unit fixed expenses are $540,000 per year that present annual sales volume at the $70 selling price is 15000 units assuming the market studies are correct what is the maximum annual profit that the company can earn at how many units and at what selling price per unit with the company generate this product profit. Please show your work clearly
Explanation / Answer
Firm will maximise its profit when marginal revenue = marginal cost
As is evident from both the tables that midway between 45000 and 50000 units, firm will be maximising its profit.
Selling units = 47500
Selling price = 57
Annual profit = TR - TC = 2707500 - 2440000 = 267500
No. Of units TFC AFC VC ATC TC MC 15000 540000 36 40 76 1140000 20000 540000 27 40 67 1340000 40 25000 540000 21.6 40 61.6 1540000 40 30000 540000 18 40 58 1740000 40 35000 540000 15.4 40 55.4 194000 40 40000 540000 13.5 40 53.5 2140000 40 45000 540000 12 40 52 2340000 40 50000 540000 10.8 40 50.8 2540000 40