Question
Your company has recently developed capabilities to produce a new model of frying pans with a revolutionary non-stick coating, called the PanX. Your company is
Your company has recently developed capabilities to produce a new model of frying pans with a revolutionary non-stick coating, called the PanX. Your company is currently producing at capacity. The marketing department has provided you with the following information about the per-unit demand for the PanX:
Price | Quantity | Revenue |
$28 | 0 | $0 |
$27 | 1 | $27 |
$26 | 2 | $52 |
$25 | 3 | $75 |
$24 | 4 | $96 |
$23 | 5 | $115 |
$22 | 6 | $132 |
$21 | 7 | $147 |
If you dedicated all resources to the production of one good, you can produce up to 40 PanX or 20 Standard Pans. PanX costs $19.50 to produce. Standard pans can be sold for $20 and cost $14 to produce. How many units of PanX should you produce to profit maximize?
Hint: Costs to produce are variable costs. For simplicity, assume you can sell fractional units of the Standard Pan (e.g. you can sell 0.5 of a pan)
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