Ivana K.

asked • 04/24/19

What is the maximum price for a car per month? (MATH PROBLEM - more in description)

The car dealer buys a certain car brand for 3,800 euros and sells it for 6,400 euros. For this price he sells 10 cars monthly. The car dealer will lower the price and expects every 100 euros reduction to bring a 1-month increase in monthly sales. What is the maximum price for a car per month?

1 Expert Answer

By:

Lenny D. answered • 05/12/19

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When Change in P is -100, Change in Q is - 10. The demand curve the dealer faces is

P= 6500-10q Marginal revenue will be MR=6500- 20q. The Marginal cost is fixed at 3800 for profit max set MC= MR or

3800=6500-20Q or 20Q =2700 or q = 135. When q =135 p = 6500-10(135) = 5150

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