Callahan Computers Has Decided to Offer Credit to Its Customers

question 1

Multiple Choice

Callahan Computers has decided to offer credit to its customers during the spring selling season. Sales are expected to be 1,000 units. The average cost per unit is $850. The owner knows that only
93% of the customers will be able to make their payments. To identify the remaining 7%, the
Company is considering subscribing to a credit agency. The initial charge for this service is $10,000,
With an additional charge of $8 per individual report. Calculate the net savings of subscribing the
Credit agency.

• A) $42,000
• B) $41,500
• C) $41,000
• D) $40,500
• E) $40,000

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Definitions:

Dominant Firm

A company that holds a large portion of the market share within its industry, exerting significant influence or control over market conditions, including prices and product offerings.

Oligopoly

A market structure in which a small number of firms have the large majority of market share.

Cournot Model

An economic model used to describe an industry structure in which companies compete on the amount of output they will produce, which they decide independently of each other and at the same time.

Dominant Price Leader

A dominant firm that sets the price of a good or service within the market, which other firms then follow, often seen in oligopolistic markets.