Compute the profit-maximizing output price and profits

Reference no: EM13394315

A van conversion company has fixed capital and labor expenses of $1.2 million per year, and variable expenses averaging $2,000 per van conversion. Recent experience suggests the following annual demand for their products:

Q = 1000 - .1P

Where Q is the number of van conversions (output) and P is price.

Calculate the profit-maximizing output, price, and profits.

Assuming a parts shortage limits their output to 300 conversions per year, use the Lagrangian multiplier method to calculate the profit-maximizing output, price, and profits.

Calculate and interpret the Lagrangian multiplier.

Reference no: EM13394315

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