A computer manufacturer sells 1,000 units per month at $500 each.A price cut to $400 is being considered.His marginal cost is constant at $300 per unit.To maintain profits, quantity sold must increase to at least
A)1,500
B)2,000
C)2,500
D)3,000

Question

Quizplus · Accepted Answer

Before the price cut, the total revenue was 1,000 x $500 = $500,000 per month.
After the price cut, the total revenue would be 1,500 x $400 = $600,000 per month.
To maintain profits, the total cost should not exceed $500,000 per month:
$500,000 - ($300 x Quantity) = $600,000
($300 x Quantity) = $100,000
Quantity = 2,000
Therefore, to maintain profits, the quantity sold must increase to at least 2,000 units per month.

A Computer Manufacturer Sells 1,000 Units Per Month at $500