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The Following Information Relates to the Magna Company for the Upcoming

question 131

Multiple Choice

The following information relates to the Magna Company for the upcoming year, based on 400,000 units.
$\begin{array}{lrr}&\text { Amount}&\text { Per Unit}\\\text { Sales } & \$ 4,000,000 & \$ 10.00\\\text { Cost of goods sold } & \underline{3,200,000} & \underline{8.00 }\\\text { Gross margin } & 800,000& 2.00 \\\text { Operating expenses } &\underline{ 300,000 }&\underline{ 0.75} \\\text { Operating profits } & \underline{ \$ 500,000} &\underline{ \$ 1.25}\end{array}$

The cost of goods sold includes $1,200,000 of fixed manufacturing overhead; the operating expenses include $100,000 of fixed marketing expenses. A special order offering to buy 50,000 units for $7.50 per unit has been made to Magna. Fortunately, there will be no additional operating expenses associated with the order and Magna has sufficient capacity to handle the order. How much will operate profits be increased if Magna accepts the special order?

Analyze how price discrimination affects production quantity and profit in monopolistic markets.

Identify the differences in demand elasticity and how they influence price discrimination strategies.

Differentiate between price discriminating and nondiscriminating monopolists regarding output and profitability.

Explain the conditions necessary for successful price discrimination.

Definitions:

Social Interaction

is the process by which individuals act and react in relation to others, shaping each other's behaviors and attitudes.

Emotion Management

Involves people obeying “feeling rules” and responding appropriately to the situations in which they find themselves.

Role Conflict

A situation where an individual faces incompatible demands or expectations from different social roles they occupy.

Status Set

The collection of social statuses that an individual occupies at a given time, reflecting their roles in society across different contexts.