Using the Following Information:
Drill Quest, Inc $Q = 1,200 - 0.05 P$

question 12

Multiple Choice

Using the following information:
Drill Quest, Inc. manufactures drill bits for the oil industry. Drill Quest uses cost-plus pricing to set the price of its bits. Currently Drill Quest applies a 50 percent markup on average total cost. Average variable cost of producing bits is constant and equal to $6,000 per bit. Total fixed cost at Drill Quest is $550,000. DrillQuest currently produces 690 bits. Statistical estimation of demand for Drill Quest brand bits produces the following linear demand equation (where Q is the number of bits demanded and P is the price of bits) :
$Q = 1,200 - 0.05 P$
-Use the MR = SMC approach to finding the profit-maximizing point on the demand for Drill Quest's bits. The maximum possible profit is $___________.

• A) $2,895,000
• B) $2,345,000
• C) $3,500,000
• D) $3,895,000
• E) $4,895,000

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Definitions:

Naturalistic Observation Method

A research method in which subjects are observed in their natural environment without any manipulation by the observer.

Real-Life

Situations, experiences, or objects that exist or occur in actuality, outside the context of books, movies, or simulations.

Laboratory Controls

Procedures and conditions implemented in a research study to minimize the effects of external variables, ensuring that the experiment measures what it intends to.

Empirical Question

A question that can be answered through observation, experimentation, or measurement, rather than by using theoretical or moral reasoning.