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A chemical company is planning to launch a new fertilizer product and carries out a market survey in order to determine the likely demand. The
A chemical company is planning to launch a new fertilizer product and carries out a market survey in order to determine the likely demand. The survey indicates that the company can expect to sell between 1000 and 2000 tons per month and that the relationship between price and quantity demanded will be linearly related as follows:
Price (000) per Ton | 16 | 15 | 14 | 13 | 12 |
Monthly demand (000) tons | 1.00 | 1.25 | 1.50 | 1.75 | 2.00 |
The company estimates that the marginal costs (in thousands) of producing the fertilizer can be represented by the equation:
Where x is the monthly output of fertilizer in thousands of tons.
- Determine the Quantity which should be produced to minimize costs.
- Without calculating them, explain the differences between the Prices and Quantities at the points at which revenue and profits are maximized.
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