Cartel Ltd. produces a single product currently priced at 50 per unit and current sales are 900 units per annum. Total fixed costs are 10,500 per annum and variable costs are 30 per unit. The company has recently been reviewing its pricing policy and estimates that an increase/decrease of 2 in the selling price would cause a decrease/ increase in sales of 100 units.

7. WhichofthefollowingequationsrepresentstheSellingPriceFunction?

a) 68 0.02x b) 68x 0.02x2 c) 680.04x d) 682x

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8. Whatistheoptimalsellingprice,whichwouldmaximiseprofit?

1. a) 68

2. b) 49

3. c) 52

4. d) None of the above

9. WhatannualprofitwillbeearnedassumingCartelLtd.setpriceattheoptimal selling price and set sales volume at the optimal quantity?

1. a) 18,050

2. b) 46,550

3. c) 36,050

4. d) None of the above