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A producer has a fixed cost of $70,000 per month, and it can produce up to 15,000 units of product per month. Each unit

 

A producer has a fixed cost of $70,000 per month, and it can produce up to 15,000 units of product per month. Each unit of product can be sold at a price of $10 in the market while the producer faces a variable cost of $3 per unit. (1) What is the economic breakeven level of product demand in the market? And what's the production capacity utilization rate at the breakeven point? (20 marks) (2) Suppose that the demand level is 12,000 units per month, what's the monthly profit of the producer? If the selling price per unit is increased by 10%, what is the percentage change in the producer's monthly profit? Which is the most sensitive factor among price, fixed cost, and demand in respective to the producer's monthly profit? (30 marks)

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1 To determine the economic breakeven level of product demand we need to find the quantity at which the total revenue equals the total cost Lets calculate the total cost first Fixed Cost 70000 per mon... blur-text-image

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