ME.docx - Managerial Economics Problem 1 A computer...

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Managerial EconomicsProblem 1A computer products retailer purchases laser printers from a manufacturer at a price of Rs.25,000 per 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 manufacturer wouldbe 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 opportunitycost of a laser printer?b. After the retailer has purchased the laser printers, what is the opportunity cost associated with sellinga laser printer to a customer? (Assume that if this customer does not buy the printer, it will be unsold atthe end of the year.)c. On December 1, the retailer still has a large inventory of unsold printers. The retailer has set a retailprice of Rs. 30,000 per printer. The manager of the store proposes that they should cut the price by halfand sell the printers at Rs. 15,000 each. The owner of the store disagrees, pointing out that at Rs. 15,000each, they would lose Rs. 10,000 on each printer sold. Is the owner’s argument correct?Solution

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