Assignment:
Mr. Mick Mouse has a trap company with fixed costs of $846, variable (i.e. operating) costs of $2 per trap and a demand curve of: traps=116-2(price). Since Mick does not understand economics, find the revenue and cost functions in terms of price for his business.
a) Describe the graph of these two functions over the price domain. Find the break-even point and the profit at the highest price possible. What does this relationship mean for his business?
b) Construct the profit function and list the key points or roots of the function. What happens to profit as Mick increases his price?
c) Using any method compute the maximum profit and the appropriate price to charge to achieve this value. What quantity of traps should he produce and what would it cost to produce these traps?
Provide complete and step by step solution for the question and show calculations and use formulas.