A computer-products retailer purchases laser printers from a manufacturer at a price of $500 per printer. During the year the retailer will try to sell the printers at a price higher than $500 but may not be able to sell all of the printers. At the end of the year, the manufacturer will pay the retailer 30 percent of the original price for any unsold laser printers. No one other than the manufacturer would be willing to buy these unsold printers at the end of the year. a) At the beginning of the year, before the retailer has purchased any printers, what is the opportunity cost of laser printers? b) After the retailer has purchased the laser printers, what is the opportunity cost associated with selling a laser printer to a prospective customer? (Assume that if this customer does not buy the printer, it will be unsold at the end of the year.) c) Suppose that at the end of the year, the retailer still has a large inventory of unsold printers. The retailer has set a retail price of $1,200 per printer. A new line of printers is due out soon, and it is unlikely that many more old printers will be sold at this price. The marketing manager of the retail chain argues that the chain should cut the retail price by $1,000 and sell the laser printers at $200 each. The general manager of the chain strongly disagrees, pointing out that at $200 each, the retailer would "lose" $300 on each printer it sells. Is the general manager's argument correct?
A computer-products retailer purchases laser printers from a manufacturer at a price of $500 per printer. During the year the retailer will try to sell the printers at a price higher than $500 but may not be able to sell all of the printers. At the end of the year, the manufacturer will pay the retailer 30 percent of the original price for any unsold laser printers. No one other than the manufacturer would be willing to buy these unsold printers at the end of the year. a) At the beginning of the year, before the retailer has purchased any printers, what is the opportunity cost of laser printers? b) After the retailer has purchased the laser printers, what is the opportunity cost associated with selling a laser printer to a prospective customer? (Assume that if this customer does not buy the printer, it will be unsold at the end of the year.) c) Suppose that at the end of the year, the retailer still has a large inventory of unsold printers. The retailer has set a retail price of $1,200 per printer. A new line of printers is due out soon, and it is unlikely that many more old printers will be sold at this price. The marketing manager of the retail chain argues that the chain should cut the retail price by $1,000 and sell the laser printers at $200 each. The general manager of the chain strongly disagrees, pointing out that at $200 each, the retailer would "lose" $300 on each printer it sells. Is the general manager's argument correct?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:A computer-products retailer purchases laser printers from a manufacturer at a price of $500
per printer. During the year the retailer will try to sell the printers at a price higher than $500
but may not be able to sell all of the printers. At the end of the year, the manufacturer will pay
the retailer 30 percent of the original price for any unsold laser printers. No one other than the
manufacturer would be willing to buy these unsold printers at the end of the year.
a) At the beginning of the year, before the retailer has purchased any printers, what is the
opportunity cost of laser printers?
b) After the retailer has purchased the laser printers, what is the opportunity cost
associated with selling a laser printer to a prospective customer? (Assume that if this
customer does not buy the printer, it will be unsold at the end of the year.)
c) Suppose that at the end of the year, the retailer still has a large inventory of unsold
printers. The retailer has set a retail price of $1,200 per printer. A new line of printers is
due out soon, and it is unlikely that many more old printers will be sold at this price. The
marketing manager of the retail chain argues that the chain should cut the retail price
by $1,000 and sell the laser printers at $200 each. The general manager of the chain
strongly disagrees, pointing out that at $200 each, the retailer would "lose" $300 on
each printer it sells. Is the general manager's argument correct?
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