Question

nike makes a golf shoe at a constant cost of $70 per unit and sells the product at $100 per unit. an unused unit of product has a salvage value of $50. demand for the product is random, with a known distribution. what is the critical fractil

Answer 1

To calculate total revenue, multiply the quantity of output by the selling price. The profit maximizing quantity is 3 units.

To calculate total revenue, multiply the quantity of output by the selling price. So, for each output level, the total revenue can be calculated as:

1. Quantity = 1 unit, Total revenue = 1 * $72 = $72
2. Quantity = 2 units, Total revenue = 2 * $72 = $144
3. Quantity = 3 units, Total revenue = 3 * $72 = $216
4. Quantity = 4 units, Total revenue = 4 * $72 = $288
5. Quantity = 5 units, Total revenue = 5 * $72 = $360

To calculate marginal revenue, find the change in total revenue resulting from producing one additional unit. So, the marginal revenue can be calculated as:

1. For 2nd unit, Marginal revenue = $144 - $72 = $72
2. For 3rd unit, Marginal revenue = $216 - $144 = $72
3. For 4th unit, Marginal revenue = $288 - $216 = $72
4. For 5th unit, Marginal revenue = $360 - $288 = $72

Total cost can be calculated by adding the fixed cost to the variable cost for each output level. So, the total cost can be calculated as:

1. Quantity = 1 unit, Total cost = $100 + $64 = $164
2. Quantity = 2 units, Total cost = $100 + $84 = $184
3. Quantity = 3 units, Total cost = $100 + $114 = $214
4. Quantity = 4 units, Total cost = $100 + $184 = $284
5. Quantity = 5 units, Total cost = $100 + $270 = $370

Marginal cost can be calculated by finding the change in total cost resulting from producing one additional unit. So, the marginal cost can be calculated as:

1. For 2nd unit, Marginal cost = $184 - $164 = $20
2. For 3rd unit, Marginal cost = $214 - $184 = $30
3. For 4th unit, Marginal cost = $284 - $214 = $70
4. For 5th unit, Marginal cost = $370 - $284 = $86

Based on the information provided, the profit maximizing quantity is the quantity at which marginal revenue equals marginal cost. So, in this case, the profit maximizing quantity is 3 units.

--The given question is incomplete, the complete question is given below:

"Nike makes a golf shoe at a constant cost of $70 per unit and sells the product at $100 per unit. An unused unit of product has a salvage value of $50. Demand for the product is random, with a known distribution. What is the critical fractile?"--