Dr. Jones, a respected chiropractic physician, believes his skills at aligning spines should earn 50 percent as much as the costs of providing alignment services, so he chooses a markup of 50 percent on his average total costs. A marketing research firm has estimated the demand for his work as a linear function of the price he charges:
Q = 300 - 1/3 P
where Q is the number of back alignments performed each month, and P is the average price of a back alignment. His accountant tells him that his average variable costs are constant and equal to $204 per alignment. Total fixed cost is $9,900 per month.
-Explain why cost-plus pricing in part e failed to maximize Dr. Jones's profit.

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The Answer of Dr. Jones, a respected chiropractic physician, believes his skills at aligning spines should earn 50 percent as much as the costs of providing alignment services, so he chooses a markup of 50 percent on his average total costs. A marketing research firm has estimated the demand for his work as a linear function of the price he charges:
Q = 300 - 1/3 P
where Q is the number of back alignments performed each month, and P is the average price of a back alignment. His accountant tells him that his average variable costs are constant and equal to $204 per alignment. Total fixed cost is $9,900 per month.
-Explain why cost-plus pricing in part e failed to maximize Dr. Jones's profit.

Dr Jones, a Respected Chiropractic Physician, Believes His Skills at Aligning