Question

Questions a b and c have been answered (answers underneath each), I'm looking for d e and f.

Swedish Automobiles Are the Best (SAAB) sells two types of vehicles: a truck and a car. Based on past trends, the inverse demand equation for trucks is estimated as Pt = 50 - 0.05Qt where Qt is the number of trucks sold per month and Pt is the price per truck (in thousands). The price equation for cars is: Pc = 40 - 0.1Qc. It costs SAAB $20 (thousand) to produce each additional truck and $18 (thousand) to produce each additional car. Assume no fixed costs for SAAB.

a. State the separate total profit and the marginal profit equations for trucks and cars:

Trucks 30-.1Qt ; Cars 22-.2Qc

b. Determine the profit-maximizing output for trucks and cars respectively price that SAAB should charge for each vehicle type.

Trucks Qt = 300, Pt = 35 ; Cars Qc = 110, Pc = 29

c. Compute the monthly total profit for trucks and cars using the quantities computed in part b:

Trucks 4,500 ; Cars 1,210

d. Suppose now that SAAB’s production capacity is limited to 260 vehicles per year. Determine the profit-maximizing quantities of trucks and cars with this new constraint. 2 points

e. Compute the monthly total profit for trucks and cars using the quantities computed in part d:

f. What would it be the benefit (in dollars) to SAAB to increase their production capacity so that their output is no longer constrained?

Answer 1