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Exhibit 7-1 A Company Manufactures Two Products. If It Charges Price P1

question 7

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Exhibit 7-1
A company manufactures two products. If it charges price p1 for product 1 and price p2 for product 2, it can sell quantities q1 = 55 − 3p1 + 2p2 and q2 = 75 + 2p1 − 2p2 for products 1 and 2, respectively. It costs the company $20 to produce a unit of product 1 and $65 to produce a unit of product 2.
-Refer to Exhibit 7-1.Suppose the company must produce a minimum of 20 units of each product.How many units of each product should the company produce in that case
What prices should it charge,to maximize profit


Definitions:

Probability

A numerical representation between 0 and 1 that indicates the likelihood of an event transpiring.

Reservation Price

Reservation price is the maximum price a consumer is willing to pay for a product or service.

English Auction

A common auction format where the price starts low and is bid upward, with the highest bid at the end of the auction winning.

Willingness To Pay

The maximum amount an individual is prepared to spend for a good or service, reflecting their valuation of it.

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