Profit Maximization - Economics | Assignment

Business Solution
Student Name
University name

1.Demand curve
The demand curve is a straight line as the price per unit does not change irrespective of the
tonnage being transported on the rail.
Demand curve.
Pric
e
Quanti
ty
2. To maximize profit, LogCo must set its price where the marginal cost is equal to marginal
revenue. In our case the marginal revenue and cost are negligible as the price does not
change. The cost of an extra haulage does not change as trains run on schedule irrespective
of the demand
Calculation
a. Variable cost
Unit Amount
Demand
70
0
Average cost
$
15,00
Variable Cost =(Demand*Average cost)
$ 10
500,00
b. Cost of loss of grain
%Loss o grain on rail transport 1%
Demand (tonnage transported)
70
0
Total loss value*$1000 per tonne
7
000,00
Total Variable Cost=(Loss on transport+
variable cost)
17
500,00
As Total cost=fixed costs + variable costs.
If we assume fixed cost is 0, then the total cost is assumed to be the variable cost.