3. Blending A federal regulation required that the average of the miles per gallon computed over all automobiles sold by

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3 Blending A Federal Regulation Required That The Average Of The Miles Per Gallon Computed Over All Automobiles Sold By 1 (167 KiB) Viewed 25 times

3. Blending A federal regulation required that the average of the miles per gallon computed over all automobiles sold by an automobile company in a specific year be at least 23 miles per gallon. Let us consider a hypothetical case for the Ford Motor Company. Assume that Ford sold only the four car types: Crown Victoria, Taurus, Escort, and Fiesta. Various parameters of theses cars are listed below: CAR MILES/GALLON SELLING PRICE Fiesta Escort Taurus Crown Vic. 33 26 24 13 MARGINAL PRODUCT COST 7000 10250 15000 23000 8500 13250 19500 28500 There is some flexibility in the production facilities so capacities may apply to pairs of car types. These limitations are: CAR TYPES LIMITED YEARLY CAPACITY IN UNITS 1,000,000 3,000,000 2,000,000 Fiesta Taurus plus Escorts Crown Vic. plus Taurus There is a sales capacity limit of 4,500,000 on the total of all cars sold. How many of each car type should Ford plan to sell?