Maximize Revenue: Oil Price & Barrels Sold

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In summary, the conversation discusses a problem involving an oil producing country trying to maximize its revenue. The country can sell 1 million barrels of oil per day at $120 per barrel, but each $1 increase in price results in a decrease of 10,000 barrels sold per day. The question is what price will maximize the country's revenue and how many barrels will be sold at that price. The solution involves writing a simple equation and using calculus to find the maximum of the function.
  • #1
kristy.ss
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I am having trouble getting this problem started.
An oil producing country can sell 1 million barrels of oil a day at a price of $120 per barrel. If each $1 price increase will result ina sales decrease of $10,000 barrels per day, what price wil maximize the country's revenue? How many barrels will it sell at that price?
 
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  • #2
Always good to start simple. What are you asked to maximize? What are the variables involved? Write a simple equation for the thing you are trying to maximize as a function of the variables. In general, what does one need to do to find the maximum of a function (think calculus)? That should at least get you started in the right direction.
 

1. How does the price of oil impact revenue?

The price of oil directly impacts revenue as it is the main source of income for companies in the oil industry. When the price of oil increases, the revenue also increases as companies can sell their oil at a higher price. On the other hand, when the price of oil decreases, revenue also decreases as companies must sell their oil at a lower price.

2. What factors influence the price of oil?

There are several factors that can influence the price of oil, including supply and demand, geopolitical events, economic conditions, and production levels of major oil-producing countries. Market speculation and OPEC decisions can also have a significant impact on the price of oil.

3. How can companies maximize revenue through oil price?

Companies can maximize revenue by keeping a close eye on the price of oil and adjusting their production levels accordingly. When the price of oil is high, companies can increase production to take advantage of the higher prices. Alternatively, when the price of oil is low, companies can reduce production to avoid selling at a loss.

4. How do barrels sold impact revenue?

The number of barrels sold has a direct impact on revenue as it represents the amount of oil that a company has sold. The more barrels sold, the higher the revenue will be. Companies can maximize revenue by increasing their production and selling more barrels of oil, provided that the price of oil is favorable.

5. How can companies increase barrels sold?

Companies can increase barrels sold by exploring new oil fields, increasing production efficiency, investing in new technologies, and expanding their market reach. Additionally, maintaining good relationships with existing clients and finding new customers can also help increase barrels sold and maximize revenue.

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