Scenario 1-4
Suppose a cigar manufacturer currently sells 1,500 cigars per week and makes a profit of $3,000 per week. The plant foreman observes, "Although the last 500 cigars we produced and sold increased our revenue by $7,500 and our costs by $7,000, we are only making an overall profit of $3,000 per week so I think we need to cut back on production

-Refer to Scenario 1-4. Had the firm not produced and sold the last 500 cigars, would its profit be higher or lower, and if so by how much?

Question

Scenario 1-4
Suppose a cigar manufacturer currently sells 1,500 cigars per week and makes a profit of $3,000 per week. The plant foreman observes, "Although the last 500 cigars we produced and sold increased our revenue by $7,500 and our costs by $7,000, we are only making an overall profit of $3,000 per week so I think we need to cut back on production

-Refer to Scenario 1-4. Had the firm not produced and sold the last 500 cigars, would its profit be higher or lower, and if so by how much?

Quizplus · Accepted Answer

The firm's profit would be $500 lower. The firm's profit is $3,000 per week. If the firm had not produced and sold the last 500 cigars, its revenue would have been $7,500 lower and its costs would have been $7,000 lower. Therefore, its profit would have been $500 higher.

Scenario 1-4 Suppose a Cigar Manufacturer Currently Sells 1,500 Cigars Per Week