Reference no: EM132715063

Questions -

Q1. ABC Manufacturing is a small company manufacturing steel sheets. Following are ABC Manufacturing's income and costs for a typical month:

Sales 6,000 units

Wholesale price $40.00 per unit

Variable costs $15.00 per unit

Fixed costs $15,000

If ABC's price is reduced by 10% and if ABC's variable costs reduce by 10%, what will be the %BE sales change?

a. 13.11%

b. 12.11%

c. 10.11%

d. 11.11%

Q2. For a constant price elasticity function, compute the price elasticity if quantity demanded at price $100 is 1760 units, and the quantity demanded at price $90 is 2000 units.

a. -3.31

b. -1.21

c. -0.21

d. -2.21

Q3. If the University bookstore sells hoodies at constant elasticity of -1.5. The variable cost per unit is $15, compute the optimal price.

a. $45

b. $35

c. $55

d. $25

Q4. For a linear demand function with elasticity of -1.5 at price $5, the quantity demanded is 1000 units. If the price is increased to $5.5, what will be the impact on quantity demanded?

a. quantity demanded will reduce to 950 units.

b. quantity demanded will reduce to 650 units.

c. quantity demanded will reduce to 850 units.

d. quantity demanded will reduce to 750 units.

Q5. Consider a firm that improves one of the levers in the profit equation by 1%, holding all else constant. Following are the details:

P = $5.00

Q = 100,000

V = $3.00

F = $125,000

Improve either P, Q, V, or F by 1%. How does this affect profit?

a. Maximum profit improvement in the best case is $8000

b. Maximum profit improvement in the best case is $5000

c. Maximum profit improvement in the best case is $6000

d. Maximum profit improvement in the best case is $7000