What is the profit position of the firm at the moment

Reference no: EM13202463

Arrow now sells 100,000 silk shirts at $100 each. The material per shirt costs $40 and labor costs are $50 per shirt. The firm has $1.2m. in fixed costs. Price elasticity of demand for such shirts is -4. The firm is considering lowering the price by 20% to $80. At the higher output, labor cost per shirt is expected to drop by 22% and the raw material supplier will offer a 15% discount on materials.

a. What is the profit position of the firm at the moment?

b. Would you advise the firm to cut prices? Why?

Reference no: EM13202463

Questions Cloud

Calculate the amount of the monthly lease payment : Penelope wants to buy a car that is worth $43,195 by making a $4300 down payment and arranging a four-year lease that calls for monthly payments in advance, interest of 2.91 percent compounded monthly, and a buyout payment of $20,000 at the end of..

What would your indexs rate of return be : If you follow the averaging procedure used to calculate the S&P 500 Index return, what would your index's rate of return be?

What is the marginal revenue for a monopolist : Define and explain the relationship between total revenue, average revenue, and marginal revenue for a monopolist. What is monopoly profit Should a monopolist produce quantities of product greater than which would maximize profiits

What is her profit - loss : An investor writes (or sells) one put option contract. If the price of gold in the spot market at the maturity date of the option is $1095, what is her profit-loss - The spot rate for the euro when the forward contract matures is $1.50/€. What is h..

What is the profit position of the firm at the moment : Arrow now sells 100,000 silk shirts at $100 each. The material per shirt costs $40 and labor costs are $50 per shirt. The firm has $1.2m. in fixed costs. Price elasticity of demand for such shirts is -4. The firm is considering lowering the price ..

What is the current profit to the exporter : BMW sells 5,000 vehicles in the US. The export price is €40,000. The exchange rate is €1= $1.25. US price elasticity of demand for the German import, in terms of the $ price, is-2. The cost of each vehicle is €30,000. What is the current € profit ..

Determine does the bank now hold excess reserves : Suppose a depositor comes to the bank and withdraws $200 in cash. Show the banks new balance sheet assuming the bank obtains the cash by drawing down its reserves. Does the bank now hold excess reserves Is it meeting the required reserve ratio

Define the marginal revenue curve at an output level : At its current level of production, a profit-maximizing firm in a competitive market receives $12.50 for each unit it produces and faces an average total cost of $10. At the market price of $12.50 per unit, the firm's marginal cost curve.

What is annual rate of return with continuous compounding : The interest rates in Canada and the United States are 6% and 5% per annum, respectively, with continuous compounding. The spot price of the Canadian dollar is $0.8000.

User Account

All Pages