Question

A firm produces a commodity and receives $100 for each unit sold. The cost of producing and selling x units is 20x 0.25x 2 dollars. Find the number of units the company should produce in order to maximize profit, and find the maximum profit.

Answer 1

160 units and $6400

Explanation:

We have that the cost per x unit is: 20 * x + 0.25 * x ^ 2

the price per unit is 100, therefore revenue for each unit would be 100 * x

However:

profit = revenue - cost

p (x) = 100 * x - 20 * x - 0.25 * x ^ 2

for the maximum value profit we must derive and equal 0:

p '(x) = 100 - 20 - 0.5 * x

0 = 80 - 0.5 * x

0.5 * x = 80

x = 80 / 0.5

x = 160

Therefore, the maximum profit occurs when there are 160 units, replacing we have:

p (x) = 100 * 160 - 20 * 160 - 0.25 * 160 ^ 2

p (x) = 6400

that is to say that the $ 6400 is the maximum profit.