Homework Help is Here – Start Your Trial Now!
Business
Economics
A computer-products retailer purchases laser printers from a manufacturer at a price of $500 per printer. During the year the retailer will try to sell the printers at a price higher than $500 but may not be able to sell all of the printers. At the end of the year, the manufacturer will pay the retailer 30 percent of the original price for any unsold laser printers. No one other than the manufacturer would be willing to buy these unsold printers at the end of the year. a) At the beginning of the year, before the retailer has purchased any printers, what is the opportunity cost of laser printers? b) After the retailer has purchased the laser printers, what is the opportunity cost associated with selling a laser printer to a prospective customer? (Assume that if this customer does not buy the printer, it will be unsold at the end of the year.) c) Suppose that at the end of the year, the retailer still has a large inventory of unsold printers. The retailer has set a retail price of $1,200 per printer. A new line of printers is due out soon, and it is unlikely that many more old printers will be sold at this price. The marketing manager of the retail chain argues that the chain should cut the retail price by $1,000 and sell the laser printers at $200 each. The general manager of the chain strongly disagrees, pointing out that at $200 each, the retailer would "lose" $300 on each printer it sells. Is the general manager's argument correct?

A computer-products retailer purchases laser printers from a manufacturer at a price of $500 per printer. During the year the retailer will try to sell the printers at a price higher than $500 but may not be able to sell all of the printers. At the end of the year, the manufacturer will pay the retailer 30 percent of the original price for any unsold laser printers. No one other than the manufacturer would be willing to buy these unsold printers at the end of the year. a) At the beginning of the year, before the retailer has purchased any printers, what is the opportunity cost of laser printers? b) After the retailer has purchased the laser printers, what is the opportunity cost associated with selling a laser printer to a prospective customer? (Assume that if this customer does not buy the printer, it will be unsold at the end of the year.) c) Suppose that at the end of the year, the retailer still has a large inventory of unsold printers. The retailer has set a retail price of $1,200 per printer. A new line of printers is due out soon, and it is unlikely that many more old printers will be sold at this price. The marketing manager of the retail chain argues that the chain should cut the retail price by $1,000 and sell the laser printers at $200 each. The general manager of the chain strongly disagrees, pointing out that at $200 each, the retailer would "lose" $300 on each printer it sells. Is the general manager's argument correct?

Economics: Private and Public Choice (MindTap Course List)
Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter24: Price-searcher Markets With High Entry Barriers
Section: Chapter Questions
Problem 12CQ
See similar textbooks
icon
Related questions
Question
A computer-products retailer purchases laser printers from a manufacturer at a price of $500 per printer. During the year the retailer will try to sell the printers at a price higher than $500 but may not be able to sell all of the printers. At the end of the year, the manufacturer will pay the retailer 30 percent of the original price for any unsold laser printers. No one other than the manufacturer would be willing to buy these unsold printers at the end of the year. a) At the beginning of the year, before the retailer has purchased any printers, what is the opportunity cost of laser printers? b) After the retailer has purchased the laser printers, what is the opportunity cost associated with selling a laser printer to a prospective customer? (Assume that if this customer does not buy the printer, it will be unsold at the end of the year.) c) Suppose that at the end of the year, the retailer still has a large inventory of unsold printers. The retailer has set a retail price of $1,200 per printer. A new line of printers is due out soon, and it is unlikely that many more old printers will be sold at this price. The marketing manager of the retail chain argues that the chain should cut the retail price by $1,000 and sell the laser printers at $200 each. The general manager of the chain strongly disagrees, pointing out that at $200 each, the retailer would "lose" $300 on each printer it sells. Is the general manager's argument correct?
Transcribed Image Text:A computer-products retailer purchases laser printers from a manufacturer at a price of $500 per printer. During the year the retailer will try to sell the printers at a price higher than $500 but may not be able to sell all of the printers. At the end of the year, the manufacturer will pay the retailer 30 percent of the original price for any unsold laser printers. No one other than the manufacturer would be willing to buy these unsold printers at the end of the year. a) At the beginning of the year, before the retailer has purchased any printers, what is the opportunity cost of laser printers? b) After the retailer has purchased the laser printers, what is the opportunity cost associated with selling a laser printer to a prospective customer? (Assume that if this customer does not buy the printer, it will be unsold at the end of the year.) c) Suppose that at the end of the year, the retailer still has a large inventory of unsold printers. The retailer has set a retail price of $1,200 per printer. A new line of printers is due out soon, and it is unlikely that many more old printers will be sold at this price. The marketing manager of the retail chain argues that the chain should cut the retail price by $1,000 and sell the laser printers at $200 each. The general manager of the chain strongly disagrees, pointing out that at $200 each, the retailer would "lose" $300 on each printer it sells. Is the general manager's argument correct?
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Economics: Private and Public Choice (MindTap Cou…
Economics: Private and Public Choice (MindTap Cou…
Economics
ISBN:
9781305506725
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
Microeconomics: Private and Public Choice (MindTa…
Microeconomics: Private and Public Choice (MindTa…
Economics
ISBN:
9781305506893
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Principles of Economics 2e
Principles of Economics 2e
Economics
ISBN:
9781947172364
Author:
Steven A. Greenlaw; David Shapiro
Publisher:
OpenStax
SEE MORE TEXTBOOKS