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HW1 AK.pdf - MGEC HW1 Answer Key Problem 1 A computer...

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MGECHW1 Answer KeyProblem 1A computer products retailer purchases laser printers from a manufacturer at a price of Rs. 25,000per printer. During the year, the retailer will try to sell the printers at a price greater than Rs.25,000, but may not be able to sell all the printers. At the end of the year, the manufacturer will buyback any unsold inventory at 40 percent of the original price. No one other than the manufacturerwould 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 theopportunity cost of a laser printer?
b)After the retailer has purchased the laser printers, what is the opportunity cost associatedwith selling a laser printer to a customer? (Assume that if this customer does not buy theprinter, 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 Rs. 30,000 per printer. The manager of the storeproposes that they should cut the price by half and sell the printers at Rs. 15,000 each. Theowner of the store disagrees, pointing out that at Rs. 15,000 each, they would lose Rs. 10,000on each printer sold. Is the owner’s argument correct?

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Term
Spring
Professor
YOGESH BHAWNANI

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