Rosetone Retail sells one product with a variable cost of $3.50 per unit. The demand at different prices to be charged is shown below: $\begin{array}{ll}\text { Units Demanded } & \text { Unit Price } \
10,000 & \$ 9 \
15,000 & \$ 8 \
20,000 & \$ 7 \
25,000 & \$ 6
\end{array}$ If fixed costs are $42,000, what price should Rosetone charge in order to maximize profits?

Question

Quizplus · Accepted Answer

To maximize profits, calculate the profit for each price point: Profit = (Price - Variable Cost) * Units Demanded - Fixed Costs. For $7: Profit = ($7 - $3.50) * 20,000 - $42,000 = $28,000, which is the highest profit among the options.

Rosetone Retail Sells One Product with a Variable Cost of $3.50