# ch 8-9 problem a)

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8-1p) the automotive supply company has a small plant that produces a speedometer exclusivly. its annual fixed cost are \$30,000, and its variable cost are \$10 per unit. it can sell a sppedometer for \$25. a) how many speedometer must the company sell to break even? b) what is the break-even revenue? c) the company sold 3,000 units last year. what was its profit? d) next year's fixed cost are expeted to rise to \$37,500. what will be the break-even quantity? e) if the company will sell the number of units obtained in part "d" and wants to maintain the same profit as last year, what will its new price have to be?
8-8p) the saline company produces and sells rock salt. its annual fixed cost was \$10,000. during the past year, the company sold 8,000 bags of its product. it estimates that at this level of sales its degree of operating leverage is 1.5. a) how much was saline's profit last year? b) at which level of production would the company just break-even?
9-5p) a phenomenon in the retail merchandising of food and clothing in the united states and united kingdom is growing in popularity of private-labels (also called store-brand) products. these products are priced at a lower level than the premium national brands. use the concepts of price elasticity and relevant cost to explain the profitability of these products from the point of view of: a) the retail stores that sell these private-label products. b) the manufactures of these private label products. if you were the manager of a national premium brand, what would you do to fight the growing competition of private labels?
9-8p) suppose there are three firms with the same individual demand function. this function is q=1,000 - 40p. suppose each firm has a different cost function. these functions are: firm 1: 4,000 + 5q firm 2: 3,000 + 5q firm 3: 3,000 + 7q a) what price should each firm charge if it wants to maximize its profit (or minimize its loss). b) explain why the answer to the preceding question indicates that two of the firms should charge the same price and the third should charge a higher price. c) which firms will be most vulnerable to a price war? explain.
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