​Half of All Your Potential Customers Would Pay $16 for Your

question 62

Multiple Choice

​Half of all your potential customers would pay $16 for your product but the other half would only pay $10.You cannot tell them apart.Your marginal costs are $4.If you set the price at $10,the expected profit is:

• A)​$3
• B)$4
• C)$5
• D)​$6

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Definitions:

Variable Expenses

Costs that fluctuate with production or sales volume, such as materials, utilities, and commissions.

Fixed Expenses

are costs that do not change with the volume of production or sales, such as rent and salaries.

Sales

The transactions between a company and its customers where goods or services are provided in exchange for money.

Margin of Safety

The difference between actual sales and breakeven sales, indicating how much sales can decrease before a business incurs a loss.