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.

Had the firm not produced and sold the last 500 cigars, would its profit be higher or lower, and if so by how much?

(A) Its profit would be exist300 lower

(B) Its profit would be exist 1,000 higher.

(C) Its profit would be exist500 higher.

(D) Its profit would be exist1, 500 lower

Question

Business

Powell

22 June, 07:03

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.

Had the firm not produced and sold the last 500 cigars, would its profit be higher or lower, and if so by how much?

(A) Its profit would be exist300 lower

(B) Its profit would be exist 1,000 higher.

(C) Its profit would be exist500 higher.

(D) Its profit would be exist1, 500 lower

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Answers (1)

Know the Answer?

Cecilia Cannon · Answer 1

The correct answer is D.

Explanation:

Giving the following information:

The last 500 cigars we produced and sold increased revenue by $7,500 and costs by $7,000.

The increase in profit by the last 500 cigars:

7500 - 7000 = $500

If the firm had not produced the las 500 cigars, the profit would have decreased by $500.