Question

The owner of ProPhone has charted the company's marginal revenue and marginal cost for its latest line of smartphones, the Blazer. Use the chart to calculate the company's profit. How many phones will ProPhone need to sell to maximize profit?

Answer 1

6 phones

Explanation:

To calculate the profit, the total revenue is subtracted by total cost.

We will calculate the company's profit as per given chart.

Quantity of phones Total revenue-total cost Profit/loss

0 0 - 90 -90 (loss)

1 200 - 170 30

2 360 - 200 160

3 480 - 290 190

4 600 - 340 260

5 700 - 400 300

6 810 - 500 310

7 910 - 620 290

The profit for selling 6 phone units is 310 which is highest.

Therefore ProPhone will need to sell six phones to maximize profit.

Answer 2

Profit is total revenue minus total cost. So, the profit for each row of data is:
Quantity | Profit
0 | 30 (loss)
1 | 30
2 | 160
3 | 190
4 | 260
5 | 300
6 | 310
7 | 290

The company has to produce 6 quantities to maximize profit.