Which of the following is a true statement of the figure?
1 answer:
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Answer:
The correct answer is NO. The best price to be charged is $3.75
Step-by-step explanation:
Demand equation is given by Q = 30 - 4P, where Q is the quantity of necklaces demanded and P is the price of the necklace.
⇒ 4P = 30 - Q
⇒ P =
The current price of the necklace $10.
Revenue function is given by R = P × Q = × ( 30Q -
)
To maximize the revenue function we differentiate the function with respect to Q and equate it to zero.
=
× ( 30 - 2Q) = 0
⇒ Q = 15.
The second order derivative is negative showing that the value of Q is maximum.
Therefore P at Q = 15 is $3.75.
Thus to maximize revenue the price should be $3.75.