MGEC HW1.docx - Problem 1 (a) At the beginning of the year,...

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Problem 1(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?
(c) Suppose that on December 1, the retailer still has a large inventory of unsold printers. Theretailer has set a retail price of Rs. 30,000 per printer. The manager of the store proposes thatthey should cut the price by half and sell the printers at Rs. 15,000 each. The owner of the storedisagrees, pointing out that at Rs. 15,000 each, they would lose Rs. 10,000 on each printer sold.Is the owner’s argument correct?
15,000Therefore, the loss based on opportunity cost will be Rs 15,000 per printer.Second Assumption: The question refers to the business decision.Let inventory left = tLet no of printers sold if price is Rs. 30,000 = xLet no of printers sold if price is Rs. 15,000 = yTherefore, for the owner to be correct,revenue from owner’s price ≥ revenue from manager’s price30000*x + 10,000 (t-x) ≥ 15,000*y + 10,000 (t-y)20,000x ≥ 5000yX ≥ y/4Therefore, the owner should not reduce the price if he is confident that at least he will be able tosell at least ¼ of the number of printers that will be sold at Rs. 15,000

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Term
Summer
Professor
Chinmay T
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