Slick Shades has a constant marginal cost of production equal to $40 and the distributors have a constant marginal cost of distribution equal to $20. If Slick Shades is producing the profit- maximizing number of sunglasses (in hundreds), what is the profit- maximizing wholesale price?
A)$110
B)$120
C)$130
D)$140

Question

Quizplus · Accepted Answer

The profit-maximizing wholesale price is found by adding the constant marginal cost of production ($40) to the constant marginal cost of distribution ($20), which equals $60. However, to maximize profit, Slick Shades would also mark up the price above these costs. Since the correct answer must account for both costs and a markup, and given the options, $120 is the most plausible choice without specific information on the markup strategy. It suggests a significant markup on top of the combined costs of $60 to cover additional expenses and profit margin, making B the best choice among the given options.

Slick Shades Has a Constant Marginal Cost of Production Equal