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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:

P=$70-$0.0005Q

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.

$2.19