Scenario 1-2 Suppose a Hat Manufacturer Currently Sells 2,000 Hats Per Week

question 250

Multiple Choice

Scenario 1-2
Suppose a hat manufacturer currently sells 2,000 hats per week and makes a profit of $5,000 per week. The plant owner observes, "Although the last 300 hats we produced and sold increased our revenue by $1,000 and our costs by $1,100, we are still making an overall profit of $5,000 per week so I think we're on the right track. We are producing the optimal number of hats."
-Refer to Scenario 1-2. Had the firm not produced and sold the last 300 hats, would its profit be higher or lower, and if so by how much?

• A) Its profit will be $1,100 higher.
• B) Its profit will be $100 higher.
• C) Its profit will be $100 lower.
• D) Its profit will be $1,000 lower.

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Definitions:

Product Life Cycle

The stages through which a product goes from conception to decline, including development, introduction, growth, maturity, and decline.

Product Life Cycle

The stages a product goes through from introduction to growth, maturity, and finally decline in the market.

Harvesting Strategy

A business approach focused on extracting maximum profit from a product, market segment, or business unit with no intention of long-term investment.

Decline Stage

A phase in the product lifecycle characterized by a decrease in sales and profits, often leading to the eventual withdrawal of the product from the market.