Homework help

Question

company sells $182 units of a product of a product. fixed cost is $12,800; per unit variable cost is $148. The product sells for $260. (a.) How much profit does the firm earn? (b.) suppose the company keeps selling price at $260 per unit, but fixed cost increases tp $16,200; unit variable cost increases to $157.40; and the number units sold drops to 165. How much profit does the firm earn now?

 

(a).?

(b).?

Answer 1

Hi Jenna,

 

Profit is equal to the total cost minus total revenue. In this case, we can come up with the cost equation, which is fixed cost + variable cost. 

 

TC = 12,800 + 148Q (Q = units of product)

TR = 260Q 

 

Therefore, the answer for a. is: 260(182) - 12800 - 148(182) = $26,936

 

b. For part b., we simply need to change the numbers in the above equation. 

 

Profit = 260(165) - 16,200 - 157.40(165) = $25,971