Artisanal Bakery's Optimal Output Decision
An artisanal bakery is trying to determine the optimal number of specialty bread loaves to produce each day to maximize its profit. The manager has compiled data on the relationship between the quantity produced/sold and the price the market will bear, as well as the total cost of production for each quantity. Analyze the data in the table below to determine the profit-maximizing quantity and the corresponding maximum profit.
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Figure 7.4b: Cheerios Profit Function Graph (Profit-Quantity Diagram)
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Artisanal Bakery's Optimal Output Decision
A company that produces handcrafted chairs has the following demand and total cost information. To maximize its profit, how many chairs should the company produce?
Quantity (Q) Price per Chair (P) Total Cost (TC) 10 $90 $700 20 $80 $1250 30 $70 $1850 40 $60 $2500 The graph below represents a company's total profit as a function of the quantity of units it produces and sells. The vertical axis measures profit in dollars, and the horizontal axis measures the quantity of units. The profit curve starts at a negative value, increases to a single peak at a quantity of 500 units where profit is $10,000, and then decreases, crossing into negative profit (a loss) at a quantity of 900 units. Based on this graph, which of the following decisions should the company make to achieve its primary goal?
A company facing a downward-sloping demand curve for its product will always maximize its profit by producing and selling the largest possible quantity for which the price per unit is still greater than the average cost per unit.
Profit Analysis for a Custom T-Shirt Business
A firm wants to find the quantity of output that will maximize its profit. The firm knows its total cost for producing any given quantity and has access to the market demand schedule, which shows the price it can charge for any quantity it wishes to sell. Arrange the following steps in the correct logical order to determine the profit-maximizing quantity.
A company's profit (π), in dollars, from producing and selling a certain good is given by the function π(Q) = -2Q² + 160Q - 2000, where Q is the quantity of goods sold. The company's production capacity is 100 units. To maximize its profit, how many units should the company produce and sell?
Critique of a Revenue Maximization Strategy
A local artisan sells custom-made wooden bowls. The table below shows the price the artisan can charge for different quantities and the total cost of producing those quantities. Calculate the total profit for each quantity level and match it to the correct quantity.
Quantity (Q) Price per Bowl (P) Total Cost (TC) 5 $50 $150 10 $45 $250 15 $40 $375 20 $35 $550 A company that manufactures custom phone cases is currently producing and selling 20 cases per day. The company is considering increasing its daily production to 30 cases. Using the demand and cost information provided in the table below, determine the effect this change in output would have on the company's daily profit.
Quantity (Q) Price per Case (P) Total Cost (TC) 10 $25 $180 20 $22 $280 30 $19 $350 40 $16 $450 Profit as Revenue Minus Total Cost
Figure 7.17: Profit Maximization for Beautiful Cars using Marginal Revenue and Marginal Cost Curves