Question
Problem: The AB Company makes two different products, namely, A and B. They have been selling product A for $59 and product B for $89.
Problem: The AB Company makes two different products, namely, A and B. They have been selling product A for $59 and product B for $89. The production costs are $30 for A and $50 for B, plus an additional $20,000 in fixed costs. The market for these products is extremely competitive. Not only will these products compete with other brands, but they will compete with each other. In order to sell all the As that they produce, they will have to reduce the price (currently $59) by $0.01 for each A sold and by $0.005 for each B sold. Similarly, the price of B (currently $89) must be reduced by $0.005 for each A sold and by $0.02 for each B sold. How many units of each product should be made, and what their prices should be, in order to maximize profits?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started