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Answer the following questions making sure to show your work. 1- Assume that a firm produces a consumer product at a price of $10,625 per
Answer the following questions making sure to show your work.
1- Assume that a firm produces a consumer product at a price of $10,625 per unit and a variable cost of $8,500 per unit. Currently the firm sells 20 units per week with a profit margin of $17,500 weekly. (Total 10 marks) a. What is the firm's current weekly fixed costs? (1 point) b. What is the improvement to profitability if variable costs are reduced by 5%, holding all else constant? (2 points) c. What is the improvement to profitability if fixed costs are reduced by 5% on average, holding all else constant? (2 points) d. What is the improvement in profitability if units sold are increased by 5% on average, holding all else constant? (2 points) e. What is the improvement in profitability if the price is increased by 5%, holding all else constant? (2 points) f. In isolation, improving which aspect of the firm will have the largest positive impact on profits - VC, FC, units sold or price? (1 point)Step by Step Solution
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