Suppose you are the marketing manager for the Fruit of the Loom.An individuals' inverse demand for Fruit of the Loom women's underwear is estimated to be P = 25 - 3Q (in cents).If cost to Fruit of the Loom to producing women's underwear is C(Q) = 1 + 4Q (in cents), compute the price Fruit of the Loom should charge for a package of women's underwear.

Question

Quizplus · Accepted Answer

To find the optimal price, we need to set marginal cost (MC) equal to marginal revenue (MR).
MC = C'(Q) = 4
MR = P + Q*dp/dQ = P - 3Q
Setting MR = MC, we have:
25 - 3Q = 4
Q = 7
Substituting Q back into the inverse demand equation, we have:
P = 25 - 3(7) = 4
Therefore, the optimal price is $1.37, which corresponds to choice (B).

Suppose You Are the Marketing Manager for the Fruit of the Loom.An