Scenario 1-3
Suppose a t-shirt manufacturer currently sells 5,000 t-shirts per week and makes a profit of $10,000 per week. A manager at the plant observes, "Although the last 400 t-shirts we produced and sold increased our revenue by $4,000 and our costs by $4,800, we are still making an overall profit of $10,000 per week so I think we're on the right track. We are producing the optimal number of t-shirts."

-Refer to Scenario 1-3. Had the firm not produced and sold the last 400 t-shirts, would its profit be higher or lower, and if so by how much?
A) Its profit would be $4,800 higher.
B) Its profit would be $800 higher.
C) Its profit would be $800 lower.
D) Its profit would be $4,000 lower.

Question

Scenario 1-3
Suppose a t-shirt manufacturer currently sells 5,000 t-shirts per week and makes a profit of $10,000 per week. A manager at the plant observes, "Although the last 400 t-shirts we produced and sold increased our revenue by $4,000 and our costs by $4,800, we are still making an overall profit of $10,000 per week so I think we're on the right track. We are producing the optimal number of t-shirts."

-Refer to Scenario 1-3. Had the firm not produced and sold the last 400 t-shirts, would its profit be higher or lower, and if so by how much?
A) Its profit would be $4,800 higher.
B) Its profit would be $800 higher.
C) Its profit would be $800 lower.
D) Its profit would be $4,000 lower.

Quizplus · Accepted Answer

The last 400 t-shirts increased costs by $4,800 and revenue by $4,000, resulting in a $800 decrease in profit. Not producing them would have avoided this loss, making profit $800 higher.

Scenario 1-3 Suppose a T-Shirt Manufacturer Currently Sells 5,000 T-Shirts Per Week