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    Calculating optimal output and profit

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    Dot.com Products, Inc., offers storage containers for fine china on the Internet. The company is the low-cost retailer of these quilted boxes with fixed costs of $480,000 per year, plus variable costs of $30 for each box. Annual demand and marginal revenue relations for the company are:


    MR=dTR/dQ = $70- $0.001Q

    A. Calculate the profit-maximizing activity level.
    B. Calculate the company's optimal profit and return-on-sales levels.

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    Solution Preview

    A. Calculate the profit-maximizing activity level.

    Given MR=70-0.001Q

    Variable cost per box=$30
    Fixed costs=$480000
    Variable cost per box=$30

    If Q is output level, then
    Total Variable ...

    Solution Summary

    Solution depicts the steps to find out optimal activity level and profit at that level.