Suppose a firm that produces pints of gourmet ice cream has monthly fixed costs of $12,000. The variable costs come to $1.50 per pint produced. (for up to 40,000 pints/month) and the firm sells each pint of ice cream for $3. Find the firm's profit function.

Question

Business

Dixie Hoover

23 April, 06:45

Suppose a firm that produces pints of gourmet ice cream has monthly fixed costs of $12,000. The variable costs come to $1.50 per pint produced. (for up to 40,000 pints/month) and the firm sells each pint of ice cream for $3. Find the firm's profit function.

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Answers (1)

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Francisco · Answer 1

P (x) = 1.5x-12,000

Explanation:

The profit function equation is:

P (x) = R (x) - C (x)

P (X) = Profit

R (x) = Revenue = 3x

C (x) = cost = fixed costs+variable costs=12,000+1.50x

x = number of pints of ice cream

Then, you can replace the equation with the information given:

P (x) = 3x - (12,000+1.50x)

P (x) = 3x-12,000-1.5x

P (x) = 1.5x-12,000

According to this, the answer is that the firm's profit function is P (x) = 1.5x-12,000.