Problem: Allied Box offers mail-order storage containers for fine china producers. The company is the low-cost provider of these boxes with fixed cost of $480,000 per year, plus variable cost of $30.00 for each box. Annual demand and marginal revenue functions for the company are:
P = $70 - $0.0005Q
MR = dTR/dQ = $70 - $0.001Q
Question 1: Calculate the profit-maximizing activity level.
Question 2: Calculate the company's optimal profit and return on sales levels.
Question 3: What would you do if you found that your profit margins were too low and your position as a cost leader were threatened?