Suppose You Manufacture 10 Million Hard Drives Per Year Specifically

question 29

Short Answer

Suppose you manufacture 10 million hard drives per year specifically for Dell laptop computers.Suppose your average variable cost C=$20/unit,annualized cost of investment to build a hard drive factory I=$30 million,and the market price (bailout market price in the event Dell does not buy)Pm=$22/unit.If Dell agrees to purchase the 10 million hard drives at a price P*=$25/unit and subsequently renegotiates to only purchase for $22.50/unit,what has Dell increased its own profits by?

---

Definitions:

Honor

In banking and finance, refers to the act of accepting or paying a negotiable instrument when it is presented.

Postdated Check

A check written with a date in the future, preventing it from being cashed or deposited until that date.

Authorized

Having been officially approved or given permission by a relevant authority.

Customer's Account

An account held by a brokerage or financial institution on behalf of a client, for the purpose of trading or managing securities and other financial assets.