Suppose you sell items on a web site like Etsy and making them requires you to rent some equipment costing $1000 per year as a fixed cost. The materials for making these items cost $30 per item as a variable cost, and you sell them for a price of $50 each. What number of items D' must you make and sell each year for you to breakeven on the cost of this activity? You may be able to raise your sales price and then sell fewer items to maximize profit. Since other people make and sell similar items, a higher price lowers the demand for your product according to the price function p = $120 - 1.5 D. What is the profit maximizing  number of items D* that you would need to make and sell to maximize profit?

Suppose you sell items on a web site like Etsy and making them requires you to rent some equipment costing $1000 per year as a fixed cost. The materials for making these items cost $30 per item as a variable cost, and you sell them for a price of $50 each. What number of items D' must you make and sell each year for you to breakeven on the cost of this activity? You may be able to raise your sales price and then sell fewer items to maximize profit. Since other people make and sell similar items, a higher price lowers the demand for your product according to the price function p = $120 - 1.5 D. What is the profit maximizing  number of items D* that you would need to make and sell to maximize profit?

Microeconomics

13th Edition

ISBN:9781337617406

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter8: Production And Costs

Section8.2: Two Sides To Every Business Firm

Problem 4ST

See similar textbooks