Math Problem Statement
PROFIT Suppose that when the price of a certain commodity is p dollars per unit, then x hundred units will be purchased by consumers, where p = -0.05x + 38. The cost of producing x hundred units is C(x) = 0.02x² + 3x + 574.77 hundred dollars. a. Express the profit P obtained from the sale of x hundred units as a function of x. Sketch the graph of the profit function. b. Find the average profit AP when the price is $37 per unit. c. Use the profit curve found in part (a) to determine the level of production x that results in maximum profit. What unit price p corresponds to maximum profit?
Solution
Let's break down this profit problem into its parts.
Part (a): Express the profit function
The profit function is the difference between the revenue and the cost :
Revenue Function :
The revenue is given by the price multiplied by the number of units sold . From the problem, we know the price function:
Since represents hundreds of units, the total revenue is:
Simplifying:
Cost Function :
The cost function is already given as:
Profit Function :
Now, the profit is:
Simplifying:
So the profit function is:
Sketching the Graph:
This is a quadratic function (a parabola) that opens downward because the coefficient of is negative. The vertex of this parabola represents the maximum profit.
Part (b): Find the average profit when the price is $37 per unit
First, we need to determine the level of production when the price is $37. Using the price function :
Solving for :
So, when the price is $37 per unit, hundred units are produced, or 2000 units.
The average profit is the total profit divided by the number of units:
Using in the profit function:
Thus, the total profit when is 97.23 hundred dollars, or $9,723. The average profit is:
Part (c): Maximum Profit
To find the level of production that maximizes profit, we take the derivative of and set it equal to zero:
So, the level of production that maximizes profit is hundred units, or 25,000 units.
Price corresponding to maximum profit:
Using the price function to find the price at :
So, the unit price that corresponds to maximum profit is $25.50.
Summary:
- Profit function:
- Average profit at price $37: $486.15
- Maximum profit occurs when hundred units (25,000 units) are produced, with a unit price of $25.50.
Would you like me to sketch the graph of the profit function or clarify any details?
Related questions:
- What happens to the profit if the unit price increases beyond $38?
- How does the cost function impact the maximum profit?
- What is the breakeven point for production in this scenario?
- How sensitive is the profit to small changes in production levels around the maximum?
- What would happen to the profit function if fixed costs increased?
Tip:
For maximizing profit, always look for the vertex of the profit function if it is quadratic.
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Math Problem Analysis
Mathematical Concepts
Quadratic Equations
Revenue and Profit Calculation
Derivatives for Optimization
Formulas
Revenue Function: R(x) = (-0.05x + 38) * x
Cost Function: C(x) = 0.02x² + 3x + 574.77
Profit Function: P(x) = R(x) - C(x) = -0.07x² + 35x - 574.77
Average Profit: AP(x) = P(x)/x
Derivative of Profit Function: P'(x) = -0.14x + 35
Theorems
Quadratic Function Properties
Vertex Formula for Maximum/Minimum of a Parabola
Suitable Grade Level
Grades 11-12, College
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