Math Solutions

[All Steps] Caytel Products manufactures two models of a particular product: the "good" model (G) and the "best" model (B). The two models are substitutes

Question: Caytel Products manufactures two models of a particular product: the "good" model

(G) and the "best" model (B). The two models are substitutes in production and must share Caytel's production facilities. Caytel has determined that the production functions for the two models are

\[\begin{aligned} \text { Good model: } Q_{G} &=4.0 H_{G} \\ \text { Best model: } Q_{B} &=4.0 H_{B} \end{aligned}\]

where \(H_{G}\) and \(H_{B}\) measure the number of hours per month Caytel's plant spends producing the good and best models, respectively. The demand functions for the two models are forecasted to be

\[Q_{G}=4,000-256 P_{G}\]

and

\[Q_{B}=600-4 P_{B}\]

The marginal cost of using Caytel's plant is estimated to be

\[M C=5.0+0.05 H \quad \text { where } H=H_{G}+H_{B}\]
  1. To maximize profit, how many hours per month should Caytel's plant operate?
  2. How should the manager allocate production time between the good model and the best model?
  3. How many units of the good model should be produced to maximize Caytel's profit? How many units of the best model?
  4. What prices should Caytel charge for the two models?

Price: $2.99
Solution: The downloadable solution consists of 2 pages
Deliverable: Word Document


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