Question

K
A company produces a special new type of TV. The company has fixed costs of $470,000, and it costs $1300 to produce each TV. The company projects that if it charges a price of $2200 for
the TV, it will be able to sell 700 TVs. If the company wants to sell 750 TVs, however, it must lower the price to $1900. Assume a linear demand.
What is the marginal profit if 250 TVs are produced
It is _____ per item.
(Round answer to nearest dollar)

Answer 1

Answer:

$980

Step-by-step explanation:

To find the marginal profit when producing 250 TVs, we first need to calculate the total cost, total revenue, and then determine the profit.

Given data:

Fixed costs = $470,000

Cost to produce each TV = $1300

Price if selling 700 TVs at $2200 = $2200

Price if selling 750 TVs at $1900 = $1900

First, let's calculate the total cost for producing 250 TVs:

Total cost = Fixed costs + (Cost per TV * Number of TVs)

Total cost = $470,000 + ($1300 * 250)

Total cost = $470,000 + $325,000

Total cost = $795,000

Next, let's calculate the total revenue for selling 250 TVs at $2200 each:

Total revenue = Price per TV * Number of TVs

Total revenue = $2200 * 250

Total revenue = $550,000

Now, let's calculate the profit:

Profit = Total revenue - Total cost

Profit = $550,000 - $795,000

Profit = -$245,000

Since the profit is negative, it means there is a loss when producing and selling 250 TVs. The marginal profit per item in this case would be the loss divided by the number of items produced:

Marginal profit per item = Profit / Number of items produced

Marginal profit per item = -$245,000 / 250

Marginal profit per item ≈ -$980

Therefore, the marginal profit per item when producing 250 TVs is approximately -$980 (loss) per item.