Palm Decor sells a single product that has variable costs of $12 per unit.The company estimates the following demand at various unit prices: $$\begin{array} { | c | c | }
\hline \begin{array} { c }
\text { Units } \
\text { Dem anded }
\end{array} & \text { Unit Price } \
\hline 31,000 & \$ 19 \
37,000 & 18 \
44,000 & 17 \
56,000 & 16 \
60,000 & 15\\hline
\end{array}$$ What price should Palm Decor charge to maximize profits?
A)$19
B)$18
C)$17
D)$16

Question

Palm Decor sells a single product that has variable costs of $12 per unit.The company estimates the following demand at various unit prices: $$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Units } \
\text { Dem anded }
\end{array} & \text { Unit Price } \
\hline 31,000 & \$ 19 \
37,000 & 18 \
44,000 & 17 \
56,000 & 16 \
60,000 & 15\\hline
\end{array}$$ What price should Palm Decor charge to maximize profits?
A)$19
B)$18
C)$17
D)$16

Quizplus · Accepted Answer

To maximize profits, calculate the profit at each price point by subtracting the variable cost from the unit price and then multiplying by the units demanded. The highest profit determines the best price. At $16, the profit is highest, making it the optimal price.

Palm Decor Sells a Single Product That Has Variable Costs