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3. Kaylees Quality Quadratic Coffee Company (KQQCC) sells tall latts for $3.75 each. Assume this is the only product KQQCC sells. KQQCC has fixed costs
3. Kaylees Quality Quadratic Coffee Company (KQQCC) sells tall latts for $3.75 each. Assume this is the only product KQQCC sells. KQQCC has fixed costs of $1,200 per month, and its actual cost to produce each latt is 95 cents.
A. (Six points.) KQQCC sells 2,000 latts per month at the price of $3.75. Kaylee experimented with raising the price to $4.00 and found that sales dropped to 1,800 latts per month. Assuming that this relationship between price and sales is linear, find a formula for the number of latts she sells as a function of the price that she charges. Then find a formula for her revenue as a function of the price she charges, and determine the price she should charge to maximize revenue. Round your answer to the nearest five cents.
B. (Four points.) KQQCCs profit is its revenue minus its total costs. Determine the price it should charge to maximize profit.
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