Question

Write 3 to 5 sentences explaining which levels of production provide Alonzo’s cycling with the maximum profit

Answer 1

The relationship between cost, revenue and profit can be presented using the formula:

Profit = Revenue - Cost

However, in the table given, the number of bikes produces varies. We cannot properly compare the profits per day. To be consistent, let us determine the profit per unit of bike produced. Simply divide the profit with the number of bikes produced (1st column). After you see the results, we can see that the highest profit is $17.5 per unit of bike produced. Therefore, the maximum profit can be attained when 4 bikes are produced each day.

Answer 2

Answer:

Profit is maximized when marginal revenue equals marginal cost.  Profit is maximized when five or six bikes are made each day.  Profit declines when more than six bikes are produced each day.

                              OR

Based on the data in the graphs, Alonzo's Cycling should produce five or six bikes if it wants to maximize its profits. This is because the sixth bike is the point at which the marginal revenue matches the marginal cost. The company will make $90 in profit with the sale of its fifth or sixth bike each day. After that, the profit begins to fall with each sale.