Question

A company sells PC software whose price is determined by p = 200 - 5Q, where Q is the quantity purchased per day. It has fixed costs of $100 per day and variable costs of $10 per unit sold.

The maximum quantity the firm should produce to breakeven is __________.
A. $2025
B. $1705
C. $290
D. $105
E. $1995

Answer 1

To find the breakeven point for the PC software company, the student must solve the quadratic equation derived from setting total revenue equal to total cost.

Step-by-step explanation:

The student is asking about how to calculate the breakeven point for a company that sells PC software. The price function for the software is given as p = 200 - 5Q, where p represents the price and Q represents the quantity purchased. Additionally, the company has fixed costs of $100 per day and variable costs of $10 per unit sold.

To calculate the breakeven quantity, we set the total cost equal to the total revenue. The total cost (TC) is equal to fixed costs plus variable costs times quantity (TC = Fixed Costs + Variable Cost x Quantity). The total revenue (TR) is equal to price times quantity (TR = Price x Quantity). At the breakeven point, TR = TC.

Therefore, at the breakeven point, we have: 200Q - 5Q^2 = 100 + 10Q. By solving this quadratic equation, we can determine the value of Q that represents the breakeven point. Therefore, the correct breakeven quantity can then be identified.