Question

An oil-producing country can sell 7 million barrels of oil a day at a price of $120 per barrel. If each $1 price increase will result in a sales decrease of 100,000 barrels per day, what price will maximize the country's revenue

Answer 1

Answer:

what price will maximize the country's revenue

maximizing price, therefore, is 90+x, and the number of barrels sold is 7,000,000−100,000x.

Explanation:

revenue=price×quantity

The price is 90+x, where x is the change in price, and the quantity is 7,000,000−100,000x

take the derivative of that function.

r(x)=(90+x)(7,000,000−100,000x)=−100,000x2−2,000,000x+630,000,000⇒r′(x)=−200,000x−2,000,000

maximizing price, therefore, is 90+x, and the number of barrels sold is 7,000,000−100,000x.