The Design Engineer's Preliminary Estimate of a Product's Design,production,and Distribution

question 22

Multiple Choice

The design engineer's preliminary estimate of a product's design,production,and distribution costs is $1,550 per unit.Market research shows potential customers are willing to pay up to $1,989 for the product.If the desired profit is 40 percent of target cost,should the company make the product?

• A)No,the market price only allows for a 28% profit at this cost.
• B)Yes,with only slight modifications to cost.
• C)Yes,the desired costs and profit are right on target.
• D)Yes,the market price will allow for a profit that exceeds the target.

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Definitions:

Revealed Preference

A theory suggesting consumers' preferences can be inferred from their purchasing habits.

Prices

Monetary values assigned to goods and services in a market, determining how resources are allocated among consumers and producers.

Weak Axiom

A less stringent rule or principle that is accepted as valid, often used in economic theories to make assumptions about consumer behavior.

Revealed Preference

An economic concept suggesting that the choices consumers make reflect their preferences, assuming that their decisions will maximize their satisfaction.