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Determine the Profit-Maximizing Price
If a firm targets a 25 % rate of return on sales, and has unit costs of production of $100, what price should it charge if it uses cost-plus pricing? If the firm has a demand function P = 10000 – 20Q is the cost-plus price the profit-maximizing price? If not, determine the profit-maximizing price, quantity and corresponding profit. Is the target rate of return the profit-maximizing r.o.r.? why or why not? What important economic considerations, does cost-plus pricing ignore?
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Example of a cost function
Given that TC=1000+10Q-0.9Q^2+0.04Q^3,,Find the rate of output Q that result in minimum Average variable cost
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THEORY OF PRODUCTION: Production activities related to goods and services require inputs. Typically, the set of inputs includes labour, capital equipments and raw materials. T
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