Fixed capital and labor expenses are $1.2 million per year.
Variable expenses average $2,000 per van conversion.
Q=1,000 - 0.1P where Q is the number of van conversions (output) and P is price.
Calculate the profit maximizing output, price and profit levels.

Solution Preview

Fixed cost = 1,200,000
Unit Variable cost = 2000
So the cost function is TC = FC + VC = 1200,000 + 2000 Q
Then marginal cost = AVC = 2000

Since Demand is Q ...

Solution Summary

Calculate the profit maximizing output, price and profit levels.

1) Who can explain me Lagrangianmultipliers with drawings scheme etc...
1)I just can't imagine what is happening in space with Lagrangianmultipliers.
2) I did this problem but here also I can't understand it, because I can't understand what is happening in space! could you explain it with drawings and schemes please : the

1.
Fixed capital and labor expenses = 1.2million/year
Variable expenses = 2,000/unit of output
Demand: Q = 1000 - 0.1P
A. Calculate profit-maximizing output, price, and profit levels
B. Using the Lagrangian multiplier method, calculate profit maximizing output, price, and profit levels in light of a parts shortage that

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