Block Island TV Currently Sells Large Televisions for $380

question 7

Multiple Choice

Block Island TV currently sells large televisions for $380. It has costs of $320. A competitor is bringing a new large television to market that will sell for $360. Management believes it must lower the price to $360 to compete in the market for large televisions. Marketing believes that the new price will cause sales to increase by 10%, even with a new competitor in the market. Block Island TV sales are currently 150,000 televisions per year.
What is the change in operating income if marketing is correct and only the sales price is changed?

• A) $6,600,000
• B) $3,000,000
• C) $(6,600,000)
• D) ($2,400,000)

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Definitions:

Extrinsic Motivation

Motivation driven by external rewards such as money, fame, grades, and praise, as opposed to intrinsic motivation, which is driven by internal desires.

Amygdala

A part of the brain involved in experiencing emotions, particularly fear and pleasure.

Emotional Information

Data or cues that relate to the feelings, emotions, or affective states of an individual or group.

Display Rules

Socially learned norms that dictate how and when emotions should be expressed in certain cultures or situations.