Question
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What is the fixed cost?
fixed cost
What is the maximum profit if each item is sold for 10 dollars? (Assume you sell everything you produce.)
maximum profit
Suppose we fix production at 36 goods produced, and that they all sell when the price is 10 dollars each. Also suppose that for each 1 dollar increase in price, 2 fewer goods are
sold (so if the price is 11 dollars, 34 of the 36 goods being produced are sold.)
To maximize profit in this case, we should increase
(Enter zero if the price should remain at 10 dollars.)

Ask by Cruz Bernard. in the United States
Mar 25,2025

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Answer

To maximize profit when producing 36 goods at 10 dollars each, increase the price by 4 dollars to 14 dollars.

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Bonus Knowledge

To maximize profit, we should evaluate the profit at different price points considering the linear decrease in quantity sold. If we increase the price to $11, you’ll sell 34 items (2 less), making your revenue $374 and costs calculated from the cost function. The challenge is to identify the price that balances both the unit increase and sales decline.
Now, if we consider other price adjustments, at $12, you would sell 32 units, and the total revenue would drop further. The sweet spot often lies around the equilibrium point where price increases just linearly affect sales volume. So, the best price adjustment could often be simply sticking to $10 unless data strongly suggests otherwise!

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