Scenario 1-1
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 1-1.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

Quizplus · Accepted Answer

The firm's profit would be $800 higher if it had not produced and sold the last 400 t-shirts, as the cost of producing these t-shirts ($4,800) exceeded the revenue generated from selling them ($4,000) by $800.

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