A&B Wholesalers sells 1,000 widgets per day at $1 each. A&B has introduced a new product to itsmix called the wiggle. It is estimated that A&B will sell 400 wiggles per day at $2 each; however,the sales of the widgets will decrease by 200 units per day. The firm's marginal change in revenues from adopting the wiggle is
A) $1,800.
B) $600.
C) $1,600.
D) $800.

Question

Quizplus · Accepted Answer

The current revenue from selling widgets is 1,000 widgets/day * $1/widget = $1,000/day.

After introducing the wiggle, the new revenue from selling widgets will be (1,000 widgets/day – 200 widgets/day) * $1/widget = $800/day.

The revenue from selling wiggles is 400 wiggles/day * $2/wiggle = $800/day.

Therefore, the marginal change in revenue from adopting the wiggle is:

Marginal change in revenue = New revenue – Current revenue
Marginal change in revenue = ($800/day + $800/day) – $1,000/day
Marginal change in revenue = $600/day

So the answer is B, $600.

A&B Wholesalers Sells 1,000 Widgets Per Day at $1 Each