A firm has a demand function p=108-5q and the cost function c=-12q+q^2. find the price at which profit is maximum. find the maximum profit. also find the output for maximum cost.

Answers

Answer 1

Answer:

[tex](a)\ q=3.5[/tex]

[tex](b)\ t_{max} = 120.25[/tex]

(c) No maximum

Explanation:

Given

[tex]p = 108 - 5q[/tex]

[tex]c = -12q + q^2[/tex]

Solving (a): The price at maximum profit.

The profit (t) is calculated using the following function

[tex]t = p - c[/tex] --- price- cost

So, we have:

[tex]t = 108 - 5q - (-12q + q^2)[/tex]

Open bracket

[tex]t = 108 - 5q +12q - q^2[/tex]

[tex]t = 108 +7q - q^2[/tex]

Rewrite as:

[tex]t = - q^2 + 7q + 108[/tex] --- this is the profit function

A quadratic function is represented as:

[tex]y = ax^2 + bx + c[/tex]

The maximum is:

[tex]x = -\frac{b}{2a}[/tex]

By comparison:

[tex]q = -\frac{7}{2*-1}[/tex]

[tex]q=3.5[/tex] ----- price at maximum profit

Solving (b): The maximum profit

The profit function is:

[tex]t = - q^2 + 7q + 108[/tex]

The maximum is:

[tex]t_{max} = -3.5^2 + 7 * 3.5 +108[/tex]

[tex]t_{max} = 120.25[/tex]

Solving (c): Maximum cost

We have:

[tex]c = -12q + q^2[/tex]

The maximum price of the above function is:

[tex]q = -\frac{-12}{2*1}[/tex] ---- from x = -b/2a

[tex]q = \frac{12}{2}[/tex]

[tex]q = 6[/tex]

So, the maximum cost is:

[tex]c_{max} = -12 * 6 + 6^2[/tex]

[tex]c_{max} = -36[/tex]

The cost function has no maximum; only minimum


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