Managerial Economics (MindTap Course List)
4th Edition
ISBN: 9781305259331
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Chapter 5, Problem 7MC
To determine
Break-even quantity.
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Gooey Bites sells snack packs for $3 per pack. Variable expenses involved in producing snack packs are estimated to be $1 per pack and fixed costs for operating the production line are estimated to be $14,000. How many snack packs must Gooey Bites sell to break even? a. 14,000 b. 3,500 c. 4,667 d. 7,000
The LEGO Architecture Collection includes three items: the White House Model
Building Kit (at $80 per kit), the U.S. Capitol Building Kit (at $40 per kit), and
the Mar-a-LEGO Club Building Kit (at $20.24 per kit; empty classified document folders
are extra). Total costs of production for different quantities of each item are given below.
a.
WHITE HOUSE
Output
per day
0
100
200
300
400
500
600
White House
U.S. Capitol
Total
cost
Mar-a-LEGO
1600
5000
11000
18000
27000
40000
55000
U.S. CAPITOL
Output
per day
0
10
20
30
40
50
60
Total
cost
100
400
750
1120
1510
1920
2350
MAR-A-LEGO
Output
per day
0
100
200
300
400
500
600
If LEGO's goal is profit maximization and the cost of production schedules
cannot be altered, what quantity of each item should be produced in the short run?
Total
cost
2000
3500
5500
8000
11000
14200
15000
b. Above what market price (to the nearest penny) should LEGO begin producing
Mar-a-LEGO kits? That is, what is the "shutdown price" for Mar-a-LEGO kits?
What must an entrepreneur do to earn a profit? How do theactions of firms earning profits influence the value of resources?What happens to the value of resources when losses are present?If a firm making losses goes out of business, is this bad?Why or why not?
Chapter 5 Solutions
Managerial Economics (MindTap Course List)
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