Manufacturers mark-up necessarily represent profit
Course:- Business Economics
Reference No.:- EM13891922

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1. Electrotech, a maker of household smoke detectors, buys resistors for its smoke alarms for $.15 each. The resistor manufacturer marks-up the resistors from $.10.

Does the resistor manufacturer’s mark-up necessarily represent profit?

Will Electrotech make more profit by making its own resistors and avoiding this mark-up?

2. Suppose that athletic shoe manufacture Avia redevelops its entire line of shoes but is unsure what its popularity will be. It order to guarantee a market for its shoes, it buys retailer Finish Line, which will carry the revamped line of shoes. Is vertical integration for this reason a profitable idea? Briefly explain.

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