Question
An office supply store purchases a large number of laser printers from a wholesaler at a wholesale price of $500. The wholesaler agrees that any
An office supply store purchases a large number of laser printers from a wholesaler at a wholesale price of $500. The wholesaler agrees that any unsold printers can be returned to them at the end of the year, and the wholesaler will pay the store back 30% of the wholesale price. The end of the year is approaching, and the office supply store has been trying to sell the printers for a retail price of $1200. However, a new line of printers is due out soon, and so the store knows that very soon they won't be able to sell many more of their existing inventory. The store's marketing manager suggests putting the current stock of printers on sale for $200 each. The store's CEO objects, pointing out that at a retail price of $200 each, the store would lose $300 on each sale!
Do you agree with the CEO? What would the store's economic profit be from each printer sold at a retail price of $200? (Ignore any fixed costs or other costs other than what is discussed here.)
(a) Yes, because at a price of $200 the economic profits per printer would be -$300.
(b) No, because at a price of $200 the economic profits per printer would be -$1000.
(c) No, because at a price of $200 the economic profits per printer would be -$850.
(d) No, because at a price of $200 the economic profits per printer would be +$200.
(e) No, because at a price of $200 the economic profits per printer would be +$50.
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