Respuesta :
Given:
The variable cost per unit is $3, fixed costs are $2.
The revenue function is:
[tex]Y_{TR}=5\sqrt{q}[/tex]
where q is the number of thousands of units of output produced.
To find:
The break - even points for company X.
Solution:
The variable cost per unit is $3, fixed costs are $2.
So, the cost function is:
Total cost = Fixed cost + Variable cost × Quantity
[tex]Y_{TC}=2+3q[/tex]
The revenue function is:
[tex]Y_{TR}=5\sqrt{q}[/tex]
At break - even points the profit is zero. It means the cost and revenue are equal.
[tex]Y_{TC}=Y_{TR}[/tex]
[tex]2+3q=5\sqrt{q}[/tex]
Squaring both sides, we get
[tex](2+3q)^2=(5\sqrt{q})^2[/tex]
[tex]2^2+2(2)(3q)+(3q)^2=25q[/tex]
[tex]4+12q+9q^2-25q=0[/tex]
[tex]4-13q+9q^2=0[/tex]
Splitting the middle term, we get
[tex]4-4q-9q+9q^2=0[/tex]
[tex]4(1-q)-9q(1+q)=0[/tex]
[tex](4-9q)(1-q)=0[/tex]
Using zero product property, we get
[tex]4-9q=0[/tex] and [tex]1-q=0[/tex]
[tex]q=\dfrac{4}{9}[/tex] and [tex]q=1[/tex]
[tex]q\approx 0.444[/tex] and [tex]q=1[/tex]
Therefore, the break even points are 0.444 and 1.
