The table below presents the expected cost and demand schedules confronting Handy John,a chair manufacturer.Given this information,what will be the profit (or loss) of Handy John at the profit-maximizing price?

Question

Quizplus · Accepted Answer

To find the profit-maximizing price, we need to calculate the total revenue and total cost at each price level. The profit-maximizing price is where the difference between total revenue and total cost is highest. At a price of $150, the quantity demanded is 25 units. The total cost at this level is $3,750 ($150 * 25). The total revenue is $4,125 ($165 * 25). The difference between total revenue and total cost is $375. At all other price levels, the difference between total revenue and total cost is lower. Therefore, the profit-maximizing price is $150 and the profit is $375 - $225 = $150.

The Table Below Presents the Expected Cost and Demand Schedules