Mary Magnolia from your workbook has variable costs equal to y²/F, where y is the number of bouquets she sells per month and where F is the number of square feet of space in her shop.If Mary has signed a lease for a shop with 600 square feet, if she is not able to get out of the lease or to expand her store in the short run, and if the price of a bouquet is $4 per unit, how many bouquets per month should she sell in the short run?

A) 600
B) 1,800
C) 300
D) 1,200
E) 1,320

Question

Jackson Spriet · Accepted Answer

Final Answer : D, Explanation :  The variable cost formula can be simplified as follows:y 2 /F = y(4-1.2y/600)Where 4 is the price per unit, 1.2 is the variable cost per unit, and 600 is the square footage of her shop.To find the short run profit-maximizing quantity, we need to set the marginal revenue (MR) equal to the marginal cost (MC), which in this case is the variable cost.MR = (4-2y/600)MC = 1.2MR = MC4-2y/600 = 1.2y = 1200Therefore, Mary should sell 1,200 bouquets per month in the short run to maximize her profit.

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