Scenario 1-2
Suppose a hat manufacturer currently sells 2,000 hats per week and makes a profit of $5,000 per week. The plant owner observes, "Although the last 300 hats we produced and sold increased our revenue by $1,000 and our costs by $1,100, we are still making an overall profit of $5,000 per week so I think we're on the right track. We are producing the optimal number of hats."
-Refer to Scenario 1-2. Had the firm not produced and sold the last 300 hats, would its profit be higher or lower, and if so by how much?
A) Its profit will be $1,100 higher.
B) Its profit will be $100 higher.
C) Its profit will be $100 lower.
D) Its profit will be $1,000 lower.

Question

Quizplus · Accepted Answer

The last 300 hats increased costs by $1,100 and revenue by $1,000, resulting in a $100 decrease in profit. Not producing them would have kept the profit $100 higher.

Scenario 1-2 Suppose a Hat Manufacturer Currently Sells 2,000 Hats Per Week