Homework answers / question archive / A company of leather handbags has just entered a new market

A company of leather handbags has just entered a new market

Economics

Share With

A company of leather handbags has just entered a new market. This company observes the following relationship between demand and price of handbags: p= 25 – 0.01D, for D>=0 where p is the price per unit in $ and D is the demand per month. The company wants to maximize its profit. The monthly fixed cost (CF) is 500 $ and variable cost (cv) is 3.5$ per unit.

a) (20 points) What is the number of leather handbags that should be produced and sold each month, in order to maximize profit?

b) (10 points) What is the maximum profit?

c) (20 points) What is minimum number of leather handbags that should be produced and sold each month, in order to make zero profit or loss?