At which price are profits minimized? Use the following chart:

Question

Quantity Sold Price Total Costs
20 $20 $150
25 18 180
30 16 200
35 14 225
40 12 250
a. 16
b. 14
c. 18
d. 12
e. $20

Answer 1

The formula for profit is:

Total Revenue - Total Costs

In this case, Total Revenue is calculated as Price x Quantity Sold. Therefore:

Profit = (Price x Quantity Sold) - Total Costs

Let's calculate the profits for each price point:

Price $20:
Profit = (20 x 20) - 150
Profit = 400 - 150
Profit = $250

Price $18:
Profit = (18 x 25) - 180
Profit = 450 - 180
Profit = $270

Price $16:
Profit = (16 x 30) - 200
Profit = 480 - 200
Profit = $280

Price $14:
Profit = (14 x 35) - 225
Profit = 490 - 225
Profit = $265

Price $12:
Profit = (12 x 40) - 250
Profit = 480 - 250
Profit = $230

As we can see from the calculations, profits are minimized at a price of $14. So the correct answer is:

b. 14