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Hi sir
Could you please tell me what exactly is this question asking us to do.
‘Derive the demand function and use that to calculate monthly profit based on the cost plus approach to pricing and also to calculate the maximum profit that could be made.’I found out the marginal Revenue using the MR formula but apparently in the recommended solution of this question, they have calculated the Quantity using the Full cost selling price as well and the calculated the difference between the two profits.
Is this what we are meant to do?
the question is called Optim Ltd.
Thank you so much
regards
Where the question asks “calculate the maximum profit that could be made”, this part is requiring you to use marginal revenue = marginal cost.
However the question also asked you to calculate the profit “based on the cost plus approach” and so this part is wanting you as a separate exercise to calculate the profit using the full cost selling price. (You still need the demand equation for that part because knowing the selling price we can calculate the quantity, and both price and quantity are needed to calculate the profit).
Unless there was more asked for in the question, there is no need to calculate the difference between the two profits. (I do not have the question – it is not a past exam question).
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