Phillip, the Proprietor of a Vineyard, Estimates That the First

question 46

Short Answer

Phillip, the proprietor of a vineyard, estimates that the first 10,000 bottles of wine produced this season will fetch a profit of $2/bottle. However, the profit from each bottle beyond 10,000 drops by $0.0002 for each additional bottle sold. Assuming at least 10,000 bottles of wine are produced and sold, what is the maximum profit? Round the answer to two decimal places.
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The maximum profit is $__________
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What would be the price/bottle in this case? Round the answer to the nearest cent.
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$__________/bottle

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Definitions:

Excess Burden

The additional cost to society beyond taxes collected resulting from inefficiencies in market outcomes due to taxation or regulations.

Tax Revenue

Funds accumulated by governments as a result of taxation.

Inelastic

Describing demand that does not change significantly when the price of a good or service changes.

Excess Burden

The cost to society created by market inefficiency, particularly through the misallocation of resources or distortions in the market.