Explore BrainMass

Explore BrainMass

    Producing Widgets: Revenue and Profit maximization

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    A company produces q widgets per day where q can be treated as a continuous variable. They can be sold for a price P(q) where P(q) = P0 * max {(1 - q/q0), 0}

    A. What quantity maximizes the manufacturer's revenue?
    B. If manufacturing costs increase linearly with the number of widgets made (cost: C(q) = c * q), what quantity will maximize the manufacturer's profit?

    © BrainMass Inc. brainmass.com October 10, 2019, 6:18 am ad1c9bdddf

    Solution Preview

    Part A
    Revenue: R(q) = Price * Quantity
    Maximum revenue occurs when R(q) is maximum and q < q0
    If q > q0 the revenue will be zero
    Revenue = R(q) = P(q) * q = P0 * (1 - ...

    Solution Summary

    This solution analyzes the revenue and profit maximization for a company producing widgets.