Question

A computer manufacturer sells 1,000 units per month at $500 each. A price cut to $400 is being considered. His marginal cost is constant at $300 per unit. To maintain profits, quantity sold must increase to at least:________.
A. 2,000
B. 2,500
C. 3,000
D. 1,500

Answer 1

Answer:

The answer should be B. 2500

Answer 2

For maintaining the profits, the quantity sold must increase to at least $2,000. Hence, Option A is correct.

What is profit?

A monetary gain, specifically the sum remaining after expenses for purchasing, running, or producing an item have been deducted is known as profit. The formula for calculating profits:

Profits = (P − ATC) × Q

Calculation of profits before the price cut:

Given that the current pricing is $500 and there have been 1000 units sold, The average total cost should be the same because the marginal cost is fixed at $300 per unit.

Profits are calculated as follows:

Profits = ( 500 − 300 ) × 1000 = 200000

So, the current profits are 200000 dollars.

Currently, a price reduction to $400 is being explored, and the company wants to keep earnings at least the same ($200000).

Calculation of new quantity sold (QN):

Profits = (P − ATC) × QN

200000 = ( 400 − 300 ) × QN

2000=QN

Therefore, to preserve profitability, the company needs to grow the number of computers sold to at least 2000 units. Option A is correct.

Learn more about Profits from here:

https://brainly.com/question/15036999

#SPJ2